Construction growth slips to three-month low

Will Green is news editor of Supply Management
posted by Will Green
3 January 2019

Growth in the UK construction sector slipped to a three-month low in December, according to the latest PMI.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index dropped to 52.8 in December, down on 53.4 in November and against the no-change reading of 50.

Anecdotal evidence suggested subdued demand was behind softer growth and unusually wet weather had acted as a brake on work.

Commercial building was the worst performing category, with activity expanding at the slowest rate since May 2018, while civil engineering was the strongest, with growth the fastest for more than one-and-a-half years.

There were positive signs for supply chains, with delivery times for materials lengthening to the least degree in more than two years. Input cost inflation was the second-lowest since July 2016, despite ongoing reports that the weak pound had pushed up the price of imports.

Duncan Brock, group director at CIPS, said: “With a slight rise in new orders and a softening in overall activity growth, firms continued to be impacted by Brexit-related uncertainty and reluctance by clients to place orders especially for commercial projects.

“The saviours of the sector were residential building expanding for the 11th month in a row and civil engineering work rising at the fastest pace since May 2017, but additional underlying pressures were still in evidence.

“Continued price increases for raw materials remained a challenge, but suppliers at least were able to deliver their best performance since September 2016 in spite of extra demand as a result of stockpiling.”

Tim Moore, economics associate director at IHS Markit, said: “An expected boost from transport and energy projects underpinned a rise in business optimism to an eight-month high in December. Construction sector confidence was also helped by softer input cost inflation and signs of a turnaround in supply chain difficulties from the low point seen last August.

“However, levels of optimism remained subdued in relation to those recorded by the survey over much of the past six years, largely reflecting concerns that Brexit uncertainty will continue to encourage delays with decision-making, especially on commercial projects.”

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