Construction dips again
6 September 2022
Construction activity in the UK dipped for the second successive month in August as customer demand moved closer to stagnation amid cost pressures and economic uncertainty, according to data in the Construction Purchasing Managers’ Index (PMI) survey compiled by S&P Global for the Chartered Institute of Procurement & Supply (CIPS).
On a more positive note, falling buying activity alleviated some pressure on supply chains, with lead times lengthening to the least extent in two-and-a-half years, while inflationary pressures also showed signs of waning.
The headline seasonally adjusted index was at 49.2 in August, up fractionally from 48.9 in July but still below the 50.0 no-change mark. Activity has now decreased in two consecutive months.
As in July, civil engineering posted the sharpest decline. Commercial activity also declined, but activity on housing projects increased for the first time in three months, albeit fractionally.
Alongside inflationary pressures, concerns around the potential for a wider economic downturn also impacted the sector in August. Construction firms scaled back their input buying for the first time since the initial wave of the COVID-19 pandemic, again reflecting signs of a slowdown.
Input costs continued to increase sharply, often due to higher fuel prices, but the rate of inflation softened to the weakest since February 2021. Similarly, the pace of increase in sub-contractor rates also softened, and was the slowest in 16 months.
Dr John Glen, chief economist at the CIPS, said: "There is some consolation for the sector as it readies itself for a future of high energy costs, however. Lower demand is leading to fewer purchases, downward pressure on input costs and more responsive supply chains. Together, these trends could eventually help to reverse inflation, but a prolonged dip in new orders will be a bitter pill for the sector to swallow."
