Press release

4 Jun 2021 London, GB

Purchasing managers report May saw strongest construction expansion since September 2014 – EY ITEM Club comments

Purchasing managers report May saw strongest construction expansion since September 2014 – EY ITEM Club comments

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Related topics Growth COVID-19
  • More encouraging news on the UK economy as purchasing managers indicate the construction sector saw increased, strong expansion in May. Even allowing for the fact that the purchasing managers’ surveys can overstate movements in the economy at times of rapid change, the levels of the May PMIs are particularly impressive
  • The construction PMI rose to 62.4 in May from 61.6 in April, taking it to the highest level since September 2014. All sectors achieved strong expansion in May, led by house building. Commercial work saw its strongest growth since August 2007
  • All elements of the construction survey were at elevated levels in May with most hitting long-term highs. New business growth was at a record high. Employment rose the most since July 2014, adding to the recent encouraging news on the UK labour market. Confidence in future output was strong
  • A concern for construction companies was that input costs rose at a survey record rate amid stretched supply chains. This will add to current mounting inflation concerns
  • The construction PMI completes a set of very strong purchasing managers’ surveys for May and adds to evidence that the economy is headed for a strong second quarter as it benefits from the significant easing of restrictions
  • The EY ITEM Club has recently raised its 2021 GDP growth forecast to 6.8% and it currently looks likely that the economy will expand even further

Howard Archer, chief economic advisor to the EY ITEM Club, says: 

“The purchasing managers survey showed the construction sector saw impressive, faster expansion in May as an already improving economy benefited from the further easing of restrictions.

“The construction PMI rose to 62.4 in May, the strongest reading since September 2014. This was up from 61.6 in April and a previous peak of 61.7 in March. The PMI had previously picked up from 53.3 in February and an eight-month low of 49.2 in January. May’s reading of 62.4 indicated robust growth as it was well above the 50.0 level that denotes flat activity.

“Even allowing for the fact that the purchasing managers’ surveys can overstate movements in the economy at times of rapid change, the level of the May construction PMI is impressive.

“However, while the overall tone of the May PMI survey was robust with most elements hitting long-term highs, there were some concerns for construction companies. Stretched supply chains and rises in raw material prices led to input prices rising at the fastest rate in the survey’s history of just over 24 years. This will undoubtedly add to mounting inflationary concerns.”

May saw all construction sectors expanding, strongly led by house building

Howard Archer continues: “The fastest expanding construction sector in May was house building, which rose at the fastest rate since August 2014. Housing market activity picked up markedly over the second half of 2020 and it has remained at elevated levels so far in 2021. This has buoyed house building activity.

“Commercial work rose almost as fast with the rate of increase the strongest since August 2007. Markit reported this reflected strong demand conditions following the reopening of customer-facing areas of the UK economy.”

New business growth strongest since survey began over 24 years ago

Howard Archer adds: “Most elements of the construction survey were improved in May and reached long-term highs.

“Boding well for future output, new business growth was the strongest since the survey began over 24 years ago. This was lifted by strong demand for residential building work and high levels of confidence about the near-term economic outlook.

“Employment in the construction sector grew at the fastest rate since July 2014, adding to the recent upbeat news on the labour market. Meanwhile, confidence in future activity among construction companies remained at a very strong level.”