The rise in Tuesday’s construction PMI data is positive news and a sign that there is renewed optimism among construction companies.
However, the PMI data remains below 50.0 as the industry continues to battle with challenges on multiple fronts.
Although the drop in inflation is helping with input costs, interest rates remain stubbornly high, and the further announced increase in minimum wage in April, coupled with the ongoing shortage of labour in some regions will continue to bite in the short-term.
The Budget next month would be an ideal opportunity for the government to announce a medium to long term commitment for the sector on both investment and planning but sadly we are instead expecting more short term focussed announcements.
Two quick wins would be first to supplement existing support making affordable and entry level housing more accessible and second to go further, building on changes to permitted developments, and make it cheaper to repurpose non-residential buildings will help to give the sector some confidence.
For the last few months, our commercial clients have been telling us that pipelines are very healthy, but work keeps getting deferred, presenting significant problems for cash flow and the overall financial health of those who are impacted throughout the supply chain. However, all could be set to change as customer demand returns.
Tuesday’s encouraging news highlights that the construction industry is on the way up following a number of months in the doldrums. An improvement in the background economic conditions will engender confidence and the situation could improve further towards the middle of the year.