A post election bounce back
The S&P Global purchasing managers’ index (PMI) for the construction industry rose significantly to 55.3 in July, up from 52.2 in June, marking the highest level since May 2022. This increase exceeded analysts’ expectations of 52.8 and was driven primarily by a resurgence in residential property projects, with this sub-sector moving into growth territory. Civil engineering also showed strong performance, partly due to reduced political uncertainty following Labour’s decisive election victory.
What does the Economics Director at S&P global have to say?
Andrew Harker, Economics Director at S&P Global Market Intelligence, said: “The election-related slowdown in growth seen in June proved to be temporary, with the pace of expansion roaring ahead in July. Firms saw the strongest increases in new orders and activity since 2022 as paused projects were released amid reports of improved customer confidence.””
Has there been much change in house prices?
The government is likely to highlight this growth as proof that its planning system reforms are positively impacting housing supply. Labour’s recent King’s Speech included plans to expand land availability for residential and commercial development.
Construction activity, especially in the residential sector, is expected to gain momentum after the Bank of England’s interest rate cut to 5 per cent. This monetary easing has led lenders to reduce rates, which could boost demand and encourage developers to increase supply.
Despite a period of sluggish house price growth, prices have begun to recover, with a 2.2 per cent annual increase in May. While Nationwide predicts minimal movement in house prices for the rest of the year, some analysts expect a modest upward trend in the coming months.
