The construction activity index returned to growth following successive decreases in January and February, but the repair and maintenance index had a poor month with a 13-point fall
01 / State of play
The construction activity index returned to growth territory in March, after rising four points to 53, following successive decreases in January and February. In contrast, the repair and maintenance (R&M) index had a poor month, suffering a 13-point decrease to 44.
The residential sector’s activity index increased by a single point to 54 in March; however, its three-month moving average has decreased by the same margin, to 53 points. The non-residential sector’s activity index returned to a value above 50, with a two point expansion to 52. The civil engineering index ticked up by a point to 42; however, the index remains entrenched in contraction territory.
The orders index experienced another increase, following last month’s two-point growth. In March the index expanded by three points to 69. Tender enquiries (59) also encountered an increase in March, up four points to its highest value in three months.
March had a large proportion of respondents reporting no constraints in construction activity, at 41.1%. Reports of bad weather affecting activity fell to 5.9%. There were smaller percentages of complaints regarding both insufficient demand (32.4%) and finance (8.6%) in March with the former having its lowest rate since September 2015. Material/equipment shortage fell to below a single percentage point (0.5%) of our responses, whereas “other factors” fell to its lowest value since July 2015 (2.2%). Labour shortage was the only constraint that increased in March, with a rise of 0.9% to 9.2%. However, this is significantly lower than the 18.8% recorded in March 2015.
The employment prospects index at 54, increased by a two point margin in March. Its three-month moving average now stands at 53, its highest value since last July.
02 / Leading construction activity indicator
The CFR’s Leading Construction Activity Indicator picked up four points to reach 53 points in March. Looking forward, we are expecting the indicator to ease slightly to 52 points by July. 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 / Work in Hand
During March 2016 once again a large proportion of civil engineering respondents reported less than three months of work in hand (89%), this was less for the non-residential sector (48%). The sector accounting for the smallest proportion for less than three months was the residential one, at 36%, although it has the joint highest amount of work in hand over the next three to six months at 31%, the same rate as the non-residential sector. In contrast, the civil engineering sector respondents reported a proportion of 11% for the same time period.
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 North-east had the largest monthly increase in its activity index value for March, with a nine point rise to 66 points, its highest level since July 2015. The East Midlands’ index (65) expanded by four points following a three point fall in February. Scotland (52) and the South-west (66) were the only remaining indices to improve in March, up two and three points respectively.
The largest decrease was from the North-west, which fell by 16 points to 44, firmly below the no-change mark. There were large decreases for Wales (62) and East Anglia (54) too, falling 13 and nine points respectively. However, they both remain in expansion territory. The West Midlands at 47 fell six points to 47, returning to a value below 50 after two months above it. Yorkshire and Humberside (65) remained unchanged in March, whereas Northern Ireland (59) fell by a single point.
The UK index, which looks at firms in five or more regions, showed continued strength, with a gain of nine points to a new high of 73.
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.