Positive signs as the construction activity index remains unchanged at 57, while, at the sector level, both non-residential and civil engineering experience boosts. Experian Economics reports
01 / State of play
The construction activity in index remained in positive territory in May, albeit slightly below its three-month average. Nevertheless, at 57 points the series remains significantly above its nadir for the last 12 months (50). The index seems to be following expectations, with strong output and orders figures for most of the new work sectors within the construction industry, coupled with less severe public sector declines.
Breaking down activity by sector, only civil engineering managed any growth on a monthly basis, swinging up 13 points to 64, while the residential and non-residential ones fell. All three remain above 50.
The orders index saw an uptick of one point to 63 in May, the fourth successive month where the orders index remained above 60, and the 14th straight period of bullish orders sentiment. Tender enquiries were also positive, reaching 60 points for the first time since January.
The proportion of respondents indicating that insufficient demand was restricting productivity decreased slightly to 39%. Those indicating that they were experiencing no constraints on activity fell to 24% in May, while those who felt bad weather was a hindering factor decreased from 7% to 4%. Financial constraints became more of a significant factor with 13% of respondents indicating their liquidity was depressing activity. Material / equipment shortage remains a minor issue as only 5% of respondents indicated a concern. Meanwhile the proportion indicating that labour shortages were impeding activity rose significantly to 13%, the highest on record.
The employment prospects index remained at the no-change mark of 50 in May, suggesting a flattening out of expectations over the coming three months.
The tender prices index rose by two points in May to reach 66. Indicating that firms are expecting the prices they charge to increase over the next three months.
02 / Leading construction activity indicator
CFR’s Leading Construction Indicator1 is expected to remain above the no-change mark for the next three months.
The indicator uses a base level of 50: an index above that level indicates an increase in activity, below that level a decrease.
03 / Work in hand
During June 2014, 63% of residential respondents reported less than three months’ work in hand, while for non-residential and civil engineering firms this was 55% and 25% respectively. The
civil engineering sector saw the highest proportion of respondents (50%) reporting that they had enough work to keep them active for between three and six months.
The residential sector reported that 24% of work was readily available after six months. Approximately 16% of non-residential firms reported that they had more than six months of work in-hand, while for civil engineering respondents this was around 25%.
04 / Regional perspectives
Experian’s 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.
Five out of 11 regions and devolved nations had an increase in their indices. Scotland experienced the greatest rise with an increase of five points from May to June, taking it to 53. Wales and Northern Ireland both showed a one point decline to 29 and 43 respectively.
The South-west saw the sharpest contraction in June, falling three points on a monthly basis to 75, although the figure is 22 points above its value for the same period of 2013.
The West Midlands, East Midlands, North-west and Yorkshire & Humberside all saw moderate gains to their indices.
Both the South-east and East Anglia saw their indices flatten out at 62 and 54 respectively, while the former has been particularly stable over the past 12 months.
In June the UK index, which includes firms working in five or more regions, fell one point to 57.
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.
1 CFR’s Leading Construction Activity Indicator incorporates a range of factors to assess the construction industry’s prospects over the next quarter. The indicator is put together using information about past levels of activity, orders and tender enquiries.