Construction Output and New Work Up but Tread with Caution, KPMG Warns

May 07, 2012 /

The Markit/CIPS Construction Purchasing Managers’ Index (PMI) has eased to 55.8 from the previous month’s 21-month high of 56.7, still well above the 50 level which separates growth from contraction and beating forecasts for a fall to 54.0.

Richard Lyle, director at KPMG, comments: “It’s encouraging news that the index again shows growth this month, particularly following rather disappointing figures from the Office for National Statistics. It is also reassuring that there is an increase in confidence albeit from a low base.

“However, it is worrying that sub-contractor rates went down, possibly due to increased competition. This part of the supply-chain is under considerable pressure and possibly shows that although orders are up they are not replacing the large infrastructure projects, which are coming to completion.

“Construction business leaders are going to have to tread with caution and carefully manage their businesses over the short term while the work from the recent increase in orders filters through.

“Input price inflation is also concerning and it is good to see that the rate of inflation is not as fast as in previous months. Margins for construction businesses are at an all time low and any easing of inflation will add to the confidence in the market and give a boost to the sector.

“Overall the market is tough and any signs of increased activity should be welcomed.”

 

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