Construction PMI dips but industry remains optimistic

House building is still the weakest-performing part of the construction sector, which saw business activity expanding at the  slowest pace since last June, while new order growth slowed-up for the third month running. That’s according to the latest S&P Construction Purchasing  Manager’s Index (PMI), released today (January 7).

The headline S&P Global UK Construction PMI registered 53.3 in December, down from 55.2 in November and the lowest for six months, although the index has been above the crucial 50.0 no-change value since March 2024, and the latest survey still shows a solid upturn in overall construction output.

Commercial activity was the fastest-growing area at 55.0, followed by civil engineering at 52.9, although both sectors had slowed since November. Residential work was again the only category to register an overall decline in output during December  at 47.6. House building activity has now decreased for three consecutive months and the latest drop was the sharpest since June 2024.

Survey respondents noted that subdued demand conditions, elevated borrowing costs and weak consumer confidence had all weighed on activity. Mirroring the trend for output volumes, total new work also expanded at the slowest rate since last June. Anecdotal evidence suggested that improving tender opportunities in the commercial building sector had been offset by cutbacks to residential development projects and a lack of new business to replace completed infrastructure work.

Construction companies responded to weaker new order growth by reducing their input buying for the first time in eight months. In some instances, lower levels of purchasing activity were linked to tighter inventory management. Suppliers’ delivery times were broadly unchanged in December. While some firms noted improving vendor performance due to lower demand, there were also reports that shipping delays had led to longer lead times for imported items.

Tim Moore, Economics Director at S&P Global Market Intelligence, said: “December data highlighted a loss of momentum for construction output growth, with all three main categories of activity posting weaker performances than in the previous month. Concerns about the demand outlook weighed on construction sector growth expectations for 2025. Although confidence recovered after a post-Budget slump during November, it was still much weaker than in the first half of 2024. Many firms reported worries about cutbacks to capital spending and gloomy projections for the UK economy.”