Construction output falls amid drop in housing activity, PMI reveals

The seasonally adjusted S&P Global UK Construction Purchasing Managers’ Index (PMI) has indicated a sustained downturn in business activity across the UK construction sector, led by weakness in the residential building segment.

The index, which tracks changes in total industry activity, registered 44.3 in August, down from 44.7 in July and below the neutral 50.0 value for the twentieth successive month.

All three sub-sectors recorded a reduction in construction activity during August, but housing was the only category to register a faster pace of contraction than in July.

Moreover, the downturn in residential work (index at 37.6) was sharper than seen elsewhere in the construction sector.

Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction companies experienced another solid reduction in output volumes, with a faster downturn in house building the main reason for a weaker overall performance during August. “Sluggish demand conditions and low client confidence, combined with anxiety about the impact of the Middle East conflict, were again factors contributing to lower workloads across the sector.

“Total new business nonetheless decreased to the least marked extent for 11 months amid reports of support from transport infrastructure work and some pockets of vitality such as data centre roll outs and energy sector projects.

“Encouragingly, input price inflation eased to its lowest since February and supply chain performance was broadly stable. Softer overall inflation was recorded in August despite upward pressure on operating expenses from higher fuel bills, logistics costs and raw material prices.
“Business optimism was still subdued, as growth projections for the year ahead eased since July and were much weaker than historic trends. Concerns about geopolitical tensions, lacklustre domestic economic prospects and elevated borrowing costs were all noted as holding back confidence.”