News

UK Construction PMI - August 2019

03-09-2019

- New orders fall at fastest pace for over ten years in August

- Construction output drops for the fourth month in a row

- Business optimism sinks to its lowest since December 2008

August data pointed to a loss of momentum in the UK construction sector, led by the sharpest reduction in new work since March 2009. Business activity meanwhile declined for the fourth consecutive month and at a slightly steeper rate than in July. Commercial work was again the worst performing area of activity in August, with survey respondents citing delayed decision-making among clients in response to domestic political uncertainty. At the same time, construction firms indicated that their business expectations for the year ahead weakened sharply since July and were the least upbeat since December 2008.

The headline seasonally adjusted IHS Markit / CIPS UK Construction Total Activity Index registered 45.0 in August, down slightly from 45.3 in July and below the 50.0 no-change threshold for the fourth consecutive month. Lower volumes of construction output were attributed to worsening order books and a lack of new projects to replace completed contracts.

All three broad categories of construction work decreased in August, led by commercial building. Survey respondents continued to note that Brexit-related uncertainty had encouraged risk aversion and tighter budget setting among clients. Civil engineering activity also dropped at a relatively sharp pace during August. In contrast, house building fell only slightly and the rate of decline was the least marked since the downturn began in June.

New orders received by construction companies have dropped in each month since April. Latest data signalled a sharp decline in new work, with the rate of contraction the fastest since March 2009. Anecdotal evidence suggested that weak demand conditions had led to a lack of tender opportunities and strong competition for new work, particularly in the commercial sub-sector.

Despite a sustained reduction in new orders, employment trends were relatively resilient during August. The latest survey pointed to only a marginal drop in staffing levels, with the rate of decline the slowest since the downturn in payroll numbers began in April. Some construction companies noted that tight labour market conditions had encouraged the retention of skilled staff, with any cuts to payroll numbers achieved through the non-replacement of voluntary leavers.

Input buying decreased for the fifth consecutive month in August, which represents the longest period of decline since the first half of 2013. Softer demand for construction products and materials helped to alleviate pressure on supply chains, with delivery delays from vendors among the least widespread for three years.

Meanwhile, input cost inflation moderated to its lowest since March 2016. Meanwhile, construction companies indicated a slide in business optimism for the second month running in August, with the degree of positive sentiment the weakest since December 2008. Concerns about the business outlook were overwhelmingly attributed to domestic political uncertainty and a corresponding drop in client spending.

 

Source: www.markiteconomics.com