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UK Construction PMI - October 201904-11-2019
- Construction output falls at slower rate in October
- Civil engineering declines at fastest pace since October 2009
- New orders and employment continue to decrease
- Business expectations for the year ahead remain subdued
October data pointed to a sustained decline in UK construction output, with overall volumes of work falling for the sixth consecutive month. The latest survey also revealed a sharp drop in new work, although the rate of contraction was the slowest for three months. Meanwhile, construction companies continued to reduce their workforce numbers in October, which was linked to weak order books and concerns about their near-term business outlook.
At 44.2 in October, the headline seasonally adjusted IHS Markit / CIPS UK Construction Total Activity Index registered below the crucial 50.0 no-change threshold. The latest reading was up from 43.3 during the previous month, but still close to the ten-year low seen in June (43.1). Construction companies noted that client demand remained subdued in response to domestic political uncertainty and the economic backdrop. In some cases, survey respondents noted that unusually wet weather in October had acted as an additional headwind to construction output.
Lower volumes of work were recorded across all three broad categories of activity. Civil engineering was the worst performing area, with business activity falling at the sharpest pace since October 2009. House building also decreased at a faster rate in October. Latest data pointed to the greatest drop in residential work for over three years. At the same time, commercial construction fell for the tenth month running, but at the slowest rate since May.
New orders dropped for the seventh month in a row during October, but the rate of decline was the least marked since July. Construction companies noted that clients continued to defer decision-making on new projects in response to political uncertainty and concerns about the economic outlook. Survey respondents also suggested that intense competition for new work had resulted in more widespread price discounting to secure contract awards.
Softer demand conditions and a lack of new work to replace completed projects resulted in another fall in staffing levels across the construction sector. Employment numbers have declined in each month since April, which survey respondents mainly attributed to the non-replacement of voluntary leavers.
Input buying dropped again in October, but weaker demand for construction products and materials did not prevent a further lengthening of suppliers' delivery times. The latest downturn in vendor performance was the sharpest since June, with construction firms commenting 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.
Meanwhile, business optimism towards the year-ahead outlook for construction work remained among the weakest seen since 2012. Some construction firms noted that contract awards related to large-scale civil engineering projects had the potential to boost workloads in the next 12 months, although political uncertainty continued to cloud the outlook.