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Highlights:
- Sector growth accelerates: The UK construction sector grew at its fastest pace in over two years, with the PMI rising to 57.2 in September.
- Input costs rise: Higher demand for materials and wage increases led to the steepest rise in input costs in 16 months.
- Optimism remains: Despite a slight dip in optimism, firms remain confident in continued growth, supported by rising inquiries and lower borrowing costs.
The UK construction sector experienced its fastest pace of growth in two and a half years in September, driven by increased activity across all key areas of the industry. According to the latest S&P Global Construction Purchasing Managers' Index (PMI), the index surged to 57.2 in September from 53.6 in August, marking the steepest expansion since February 2021.
The PMI reading remained above the crucial 50.0 mark, which separates growth from contraction, for the seventh consecutive month, signaling continued resilience and momentum in the construction sector.
Strong Growth Across All Activity Areas
Tim Moore, economics director at S&P Global Market Intelligence, highlighted the widespread improvement in output growth across the sector. He attributed the boost to a combination of favorable economic conditions, including lower interest rates and enhanced domestic economic stability, as well as robust pipelines of infrastructure projects.
"UK construction companies indicated a decisive improvement in output growth momentum during September, driven by faster upturns across all three major categories of activity," said Moore.
New project starts also contributed to a moderate increase in employment and a rise in purchasing activity as construction firms ramped up their operations to meet growing demand.
Rising Input Costs Amid Strong Demand
Despite the strong growth, the sector faced rising input costs in September, with the steepest increase in 16 months. The higher costs were driven by greater demand for raw materials and increased wages passed on by suppliers, reflecting a combination of inflationary pressures and supply chain challenges.
"Greater demand for raw materials and the pass-through of higher wages by suppliers led to the steepest increase in input costs for 16 months," Moore noted.
Cautious Optimism Moving Forward
While business optimism edged down slightly to its lowest level since April, it remained significantly higher than the low point recorded last October. Many construction firms expressed confidence in continued growth, pointing to rising sales inquiries following the general election and lower borrowing costs as positive factors. The potential for stronger demand in house building was also highlighted as a driver of future activity.
The UK construction sector's robust performance in September underscores its resilience in the face of ongoing economic challenges, with expectations for further expansion in the months ahead.
