Construction and manufacturing remain in contraction

Will Green is news editor of Supply Management
4 November 2019

The UK construction sector remained in contraction in October as new orders and employment continued to fall.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index rose to 44.2 in October, up on 43.3 in September but still below the neutral 50 reading. Readings below 50 signal negative growth.

Yet again companies noted subdued client demand due to political uncertainty with civil engineering the worst-performing area, but house building dropped to a three-year low and commercial construction fell for the tenth month running.

New orders dropped for the seventh month in a row while staffing levels have declined in each month since April.

Input buying dropped again in October, though weaker demand for products and materials did not prevent a further lengthening of supplier delivery times. Construction firms commented on stock shortages among suppliers, especially plasterboard and insulation materials. However, input cost inflation was the lowest for just over three-and-a-half years.

Duncan Brock, group director at CIPS, said: “To say these figures are disappointing is a big understatement. Given that the next political hurdle is December’s General Election, all eyes will be on the new administration and clear direction, because at the moment there is little insight into what could possibly pull the sector out of its ditch.”

Meanwhile, the manufacturing sector also remained in contraction in October with downturns in output, new orders and employment.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index rose to 49.6 in October, up on 48.3 in September and a six-month high.

Ahead of the 31 October Brexit departure date there were higher levels of input purchasing and a build-up of safety stocks, with growth in inventories of finished goods and purchases at six-month highs.

Price pressures remained relatively contained and input prices were unchanged over the month. Output charge inflation was also among the weakest registered in over three-and-a-half years.

Brock said: “As the manufacturing sector remains in the twilight zone, wondering whether to stock or de-stock, hire new staff, look for new business or batten the hatches once again, it looks like a scary end to the year.”

Rob Dobson, director at IHS Markit, said: “With a further Brexit extension confirmed and the prospect of a December general election, it looks as if the spectre of uncertainty will cast its shadow over manufacturing for the remainder of 2019.”

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