Good news as new orders increased at the fastest rate ever recorded in the Purchasing Managers’ Index (PMI) covering May.

The IHS Markit/CIPS reading for the month found new order volumes increased by their fastest pace since the survey began in 1997.

Overall activity was up to 64.2 in May, from 61.6 in April – a reading above 50 means activity is increasing. Output saw its strongest growth since September 2014 in the month.

The positive indicators were balanced by cost inflation also being at a record high in the month, reflecting the ongoing surge in demand for construction materials and severe supply shortages.

Housebuilding was the strongest growing part of the sector, followed by commercial work and then civil engineering, with growth seen across all areas. Commercial projects saw their steepest growth since August 2007, which CIPS and IHS Markit attributed to the reopening of customer-facing areas of the economy.

Mark Robinson, chief executive of procurement authority Scape, warned that, despite the growth figures, the industry “cannot afford to become complacent” amid the rising cost of materials.

“As the wider economic recovery continues to accelerate, it is at this point – with material shortages driving record levels of inflation – that project timetables and the stability of contractors may be affected.

“With trade barriers unlikely to be removed in the second half of the year, attention will need to turn to careful project and cost management to ensure that supply chains remain resilient, new schemes start as planned and the recovery continues at pace,” he said.

Fraser Johns, finance director at contractor Beard, said: “It’s clearly very welcome to be talking up prospects and seeing the trends going in the right direction, but there has to be a reality check taken as the ongoing crisis in materials shortages threatens to undermine the fast-paced recovery we’re seeing.

“Supply chains are stretched like never before as the drop in factory output across Europe due to the coronavirus is really biting into delivery times, coupled with the ongoing difficulties at our ports due to Brexit.”

He called for a collaborative approach between suppliers and their customers over materials shortages, to mitigate long lead-in times on materials.

Joseph Daniels, CEO of modular housebuilder Etopia Group, said the price rises mean “there is a real risk that smaller developers, who play a crucial part in delivering homes across the UK, will be priced out”.

He added: “The industry must focus on taking a digitally-led approach to supply chain procurement to cut down on waste and avoid ‘over-ordering’. Such an approach is taken by the modular housing sector, where waste is minimised, and high levels of recycling can be achieved thanks to technology that generates precise estimates of materials needed for each home.”