Activity has been increasing consistently for the past six months for the sector as a whole, with no imminent sign of a change in this pattern over the coming quarter
01 / State of play
The construction activity index rose by two points to 56 in April, its strongest value since last December. The repair and maintenance index picked up by three points to 47 – this means, however, it remained in contraction territory. The residential sub-sector’s activity index improved by a further five points to 60 in April, and its three month moving average reached its highest level since May last year (56). The non-residential activity index also saw a solid increase, after rising by three points to 56. In contrast, the civil engineering sector remained entrenched in contraction territory. The orders index continued to exhibit buoyancy, with a four point increase to 73. Tender enquiries were also up, albeit by a single point to 61. In April 43% of our panel reported no constraints in activity; this was one of the highest ever proportions to do so. At 1.6% bad weather was less of a concern than for the same period last year (2.3%). Insufficient demand continues to be one of the largest worries for our panel with 31.7% reporting it as an issue. However, this was down significantly on six months ago, with its October 2015 level at 42%. There were slight increases in responses regarding labour shortages and financial woes, with both being noted as an issue for 10.9% of respondents. In contrast, material and equipment shortages were of little concern in April. The employment prospect index showed continued strength as it increased by three points to 57. The index has found itself above 50 for the last six months.
02 / Leading construction activity indicator
The CFR’s Leading Construction Activity Indicator ticked up by two points to reach 56 points in April. We expect it to remain relatively unchanged in the coming quarter. The indicator uses a base level of 50: an index value above that level suggests an increase in activity, while one below it highlights a decrease.
03 / Labour Costs
During April 2.8% of non-residential and residential respondents reported falling labour costs, down from 10% in January 2016. 8.3% of our panel reported labour inflation in the range of 0% and 2.5%. Two thirds of the respondents experienced cost rises between 2.6% and 5.0%, while no respondents outlined increases in the region of 5.1% to 7.5%. Finally, 22.2% of responses indicated inflation greater than 7.6%. Within the civil engineering sector, 20% stated labour cost inflation between 0% and 2.5%. The remaining responses mentioned growth between 2.6 and 5%.
04 / Regional perspectives
Experian’s regional composite indices incorporate current activity levels, the state of order books and the number of tender enquiries received by contractors to provide a measure of the relative strength of each regional industry. The East Midlands experienced the most positive April out of all the regions, as its index strengthened by eight points to 73, its highest value since October 2015. Scotland increased by seven points to reach 59; this is the second successive month in which the devolved nation has bettered its regional activity outlook. Yorkshire and the Humber (69) increased by four points and the North West (49) by five points. However, the latter remained in contraction territory. Northern Ireland (61) and East Anglia (55) also strengthened slightly. The North-east at 66 points was unchanged from March’s level. The largest decrease came from Wales in April, as its index fell by nine points to 53. However, given the previous month’s strength, it managed to stay in growth territory. The South-west (61) and South-east (61) remained buoyant. In contrast, the West Midlands declined further into negative territory, after posting a two point fall to 45.
The UK index which looks at firms in five more regions remained at a robust level of 67 in April.
This an extract from the monthly Focus survey of construction activity undertaken by Experian Economics on behalf of the European commission as part of its suite of harmonised EU business surveys.
The full survey results and further information on Experian Economics’ forecasts and services can be obtained by calling 0207-746 8217 or logging on to www.experian.co.uk/economics
The survey is conducted monthly among 800 firms throughout the UK and the analysis is broken down by size of firm, sector of the industry and region. The results are weighted to reflect the size of respondents. As well as the results published in this extract, all of the monthly topics are available by sector, region and size of firm. In addition, quarterly questions seek information on materials costs, labour costs and work-in-hand.