010 RCI 0517

RCI May 2017

Zink INDUSTRY NEWS 01992 801927 www.almhm.co.uk Construction growth picks up in April with sharpest rise in total output in 2017 so far UK construction companies reported a solid start to the second quarter of 2017, helped by faster rises in civil engineering and residential building activity. April data also pointed to the strongest upturn in incoming new work so far this year, which survey respondents linked to the resilient economic backdrop and a sustained improvement in client demand. Greater workloads underpinned a further increase in employment numbers and the most marked rise in input buying since November 2016. Robust demand Meanwhile, robust demand for construction materials and upward pressure on costs from sterling depreciation resulted in another steep increase in input prices during April. At 53.1, up from 52.2 in March, the seasonally-adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) pointed to a solid rise in overall construction output. The latest reading was well below the post-crisis peak seen in January 2014 (64.6), but still signalled the sharpest rate of 010 MAY 2017 RCIMAG.COM Copper Stainless UK manufactured goods in high demand The UK’s manufacturers have reported strong growth in orders both at home and from abroad over the first quarter of 2017, although costs and prices have also continued to rise at an elevated pace. The latest CBI Industrial Trends Survey of 397 manufacturers found that domestic orders had improved at the fastest pace since July 2014 in the three months to April. Meanwhile export orders recorded the strongest growth in six years, supported by strong rises in competitiveness, particularly in non-EU markets, which improved at a record pace. The weak pound continued to push up costs, with manufacturers reporting the strongest rises in unit costs in six years. Output growth firmed to a threeyear high and is expected to accelerate over the next quarter. Manufacturers anticipate that new orders will grow more moderately over the near-term, largely owing to a predicted slowdown in domestic demand outweighing export orders growth – expectations for the latter are at their strongest in over two decades. Companies are also upbeat in their year-ahead expectations for exports, with optimism posting the biggest gain in over four decades, contrasting with their assessment about the overall business situation which was unchanged. The report found that there was a softening in investment plans across the board, particularly those for buildings and plant & machinery, with the latter at its most negative for nearly six years. When queried about potential limits on capital spending over the next year, the proportion of firms citing inadequate net returns climbed to the highest in a decade. Headcount saw decent growth, but hiring intentions for the next three months are muted. Rain Newton-Smith, CBI chief economist, said: “Exports have surged and firms are at their most optimistic about selling overseas in over four decades. Even so, the combination of the weak pound and recovering commodity prices means that cost pressures continue to build, and manufacturers report no sign of them abating over the near-term.” £50bn+ spent on home improvements New research from roof window manufacturer Velux has found that nearly six in ten (59%) of the UK’s homeowners are planning to carry out home improvements worth £50.89bn over the next six months – contradicting recent reports of weakened consumer confidence. The VELUX 2017 Home Improvement survey showed that the number of property owners planning home improvement projects has increased by 12% on this time last year. Contrary to many recent reports suggesting a weakening of consumer confidence in the shadow of Brexit, the UK’s home improvers are willing to invest to create their dream home, with a planned average spend of £4,870 over the next six months. One in six home improvers (16%) are planning to spend over £10,000 on their proposed projects. According to the findings, the rationale for home improvement is more emotional than rational. Over a third of homeowners expansion so far this year. Civil engineering was the best performing sub-category of construction activity in April, with the rate of expansion the fastest since March 2016. Growth of residential building also accelerated, reaching a four-month high. Commercial building work increased only slightly and at a weaker pace than in March. April data pointed to a solid upturn in new work received by UK construction companies, with the rate of expansion the strongest seen so far this year. However, mirroring the trend seen for business activity, the latest upturn in new work remained much slower than seen at the peak phase of the recovery in early-2014. Higher volumes of new work encouraged further job creation across the construction sector in April. The rate of employment growth was the strongest since May 2016. Survey respondents indicated additional pressures on the availability of sub-contractors during April, which added to signs of challenges in recruiting skilled labour. Demand for construction materials increased in response to a sustained upturn in new work, as highlighted by a renewed upturn in input buying during April. This contributed to a sharp and accelerated deterioration in vendor performance, with lead-times from suppliers lengthening to the greatest degree since June 2015. Average cost burdens increased sharply in April, although the rate of inflation continued to moderate from the five-and-a-half year peak seen at the start of 2017. Higher prices were linked to exchange rate factors, as well as increased energy and fuel costs. A promising forecast Meanwhile, around five times as many survey respondents (49%) expect a rise in construction output over the year ahead as those that forecast a fall (10%). The degree of confidence was down fractionally since March, but still well above the post-referendum low seen in July 2016. Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “April’s survey reveals a positive start to the second quarter of 2017, with a robust upturn in civil engineering activity helping to boost the construction industry. There were also more encouraging signs from the house-building sector, as growth recovered to its strongest so far this year. However, the performance of the commercial building sector remained subdued in the context of the past four years. “UK construction companies noted that the resilient economic backdrop helped to drive up client spending in April. Greater workloads led to the fastest pace of job creation since May 2016 and a continued squeeze on subcontractor availability. “Supply chain pressures also intensified, as highlighted by the largest lengthening of delivery times for almost two years. A sharp rate of input cost inflation persisted in April, reflecting an ongoing pass through of higher commodity prices, imported goods and energy costs. “However, the recent recovery in sterling may have started to help limit some cost pressures in April, as the overall rate of input price inflation moderated to a six-month low.” (34%) who are planning to improve their property over the next six months are doing so because they love their home and the area they live in and don’t want to move. By comparison, a quarter (26%) are improving their home to add value to the property. ‘Home sweet home’ This ‘home sweet home’ philosophy is also front of mind for a quarter of home improvers (24%), whose main reason for home improvement is one of selfsatisfaction, simply to make them feel good about themselves. As a key reason for home improvement, it is only marginally behind adding value. Grant Sneddon, product manager from VELUX, said: “Whether it’s by creating an extra room, converting a loft, building an extension or replacing a kitchen or bathroom, it appears that home owners up and down the county are realising the potential of their homes and choosing to improve or to add to the space they have, instead of moving to a different property.”


RCI May 2017
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