Despite a fall in the overall number of construction projects currently underway, the latest data shows that the fiscal output from the sector continues to grow as projected. The general consensus across economists and industry analysts is that 2016 will see 3.3% growth. This would mean a total output figure of just over £135bn, which would beat the current record holding year of 2007 by some £2bn. As always, the Purchasing Managers’ Index (PMI) has been used as one of the measurements to see if projections are on track. The February 2016 PMI figure shows that this is the case.
The United Kingdom Construction PMI figure for February 2016 has been given as 54.20. While this figure represents a fall on a month-to-month measurement, there has been little overall concern. When we consider seasonal adjustments, while also remembering that this figure is double the lowest ever recorded and only 17% off the highest, there has been widespread acceptance of this figure. It should also be noted that any PMI figure above 50 represents growth in a sector.
When looking at the PMI for the construction industry or any sector, it is important to understand the five major indicators which contribute towards the final figure. These are the number of new orders placed, new and ongoing production work, inventory or stock levels, supplier demand and delivery levels, and level of employment. At this time the UK’s construction industry is characterised by a lower number of actual projects that have a substantially higher real term value than average. In short, what the PMI reflects is that although there is less construction happening, it is of a higher value.
The overall view remains that the projected 3.3% growth can be achieved throughout the year. However, everyone involved in the sector needs to be mindful of the implications which the new PMI data presents. The continuing success of construction projects and the consistent, high level of demand for new buildings means that the industry has every reason to remain confident of achieving outstanding results.