Mixed construction picture

4 August 2023

There are positives and negatives in the latest snapshot of building activity provided by the construction purchasing managers’ index (PMI) data for July, gathered by S&P Global and the Chartered Institute of Procurement & Supply (CIPS).

House building continues to be impacted by higher interest rates and inflation, with a steep fall in activity down to 43.0 (50.0 would indicate no change from the previous month). 

Lower volumes of residential work have now been recorded for eight consecutive months, although the rate of decline eased to its least marked since April, says the report. 

Construction companies noted that rising borrowing costs had led to fewer sales enquiries and slower decision-making among clients. There was only a marginal rise in total new work and the rate of growth was slower than seen on average in the first half of 2023. 

However, some firms cited solid demand for refurbishment projects and greater opportunities for infrastructure work. 

On a more positive note, the survey data signalled a renewed expansion of overall construction output, following the marginal decline seen in June. This was led by the strongest rise in commercial building (index at 54.4) and civil engineering (53.9) since February.

The overall index for total construction industry activity posted 51.7 in July, up from 48.9 in June and the highest level for five months, albeit a modest rise.

Business expectations for the year ahead remained positive overall and picked up slightly since the previous survey period, although survey respondents indicated that pressure on customer budgets from higher interest rates remained a key factor.