Construction PMI: Housing activity at highest level since November 2022

According to the latest PMI data by S&P and CIPS, the headline construction PMI for March increased slightly to 50.2, up from in 49.7 in February. 

Kelly Boorman, national head of construction at RSM UK, said: ‘This is the first time since August 2023 that we’ve seen an uptick in the PMI above 50. This represents the sentiment of the industry with activity growth expected to continue in 2024. 

‘Housing activity is at its highest since November 2022, with a noticeable rise in mortgage approvals and a commitment from housebuilders to increase volumes. An increase in investment from funds and availability in mortgage products is set to stimulate the affordable housing market and drive volumes up, while larger educational and healthcare projects will also aid the recovery of the housing market. 

‘Although the availability of subcontractors rose to 57.2 last month, with insolvencies predicted to rise significantly in the coming months and an uplift in activity across commercial and housing, this could create a perfect storm for shortages in the supply chain. 

‘New orders also increased to 52.6 in March, demonstrating a strong recovery in pipelines. Businesses continue to manage and monitor their pipeline and procurement processes to preserve margin and manage growth.’

Thomas Pugh, economist at RSM UK, commented: ‘The strong rise in the S&P/CIPS construction PMI to 50.2 in March is encouraging. The PMIs are still pointing to a return to growth in the first quarter of this year, adding to evidence that last year’s recession is already over. We expect the economy to gradually pick up steam over the rest of the year as lower inflation, falling interest rates and tax cuts boost consumer spending.

‘Indeed, we expect growth to come in at 0.2% in Q1 making last year’s recession one of the smallest and shortest on record. Businesses are also clearly feeling confident about the future. Indeed, a gradual recovery in housing transactions and prices over the rest of the year should support house builders. 

‘In terms of the inflation outlook, the input prices balance dropped to 50.9 which is consistent with inflation falling back to the 2% range. We expect inflation to fall below 2% by April, setting the stage for an economic recovery in the second half of the year. What’s more, the employment index was just 48.8, suggesting that hiring demand is flat which should contribute to lower wage growth. 

‘Overall, the PMIs paint a picture of a fragile economic recovery. It will probably not be until the second half of the year when growth picks up sharply. Lower inflation, falling interest rates and tax cuts should kick start consumer spending, which should then flow through to an improvement in business confidence and the rest of the economy.’