Sharp construction decline
6 July 2022
UK construction companies signalled another loss of momentum in June as total business activity expanded at the weakest pace for nine months and new orders increased to the smallest extent since last October, according to a highly respected analysis.
In the Construction Purchasing Managers’ Index (PMI) survey compiled by S&P Global for the Chartered Institute of Procurement & Supply respondents expressed worries about the near-term economic outlook, leading to a sharp decline in business expectations for the year ahead. June data indicated that growth projections are now the least upbeat since July 2020.
At 52.6 in June, down from 56.4 in May, the headline seasonally adjusted index, which measures month-on-month changes in total industry activity, still registered above the 50.0 no-change mark for the seventeenth consecutive month.
However, the latest reading signalled only a moderate increase in construction output and the slowest rate of expansion since September 2021.
Civil engineering was the most resilient sub-sector in June (index at 54.3, down only slightly from 55.5 in May). A similarly strong increase in business activity was seen in the commercial segment, but the rate of growth eased sharply since May to the slowest so far in 2022 (index at 54.3, down from 59.8).
House building was the weakest-performing area of construction activity for the fourth month running in June. Moreover, the latest index reading of 49.3 signalled an overall downturn in residential work for the first time since May 2020, say the report authors.
June data pointed to a solid rise in total new orders, but the rate of expansion softened to its weakest since October 2021. Some construction companies noted a lack of new work to replace completed projects due to economic uncertainty and inflation concerns.
Looking ahead, around 36 per cent of construction companies anticipate a rise in business activity, compared to 17 per cent expecting a decline. While this highlighted positive sentiment overall in June, the degree of optimism was the lowest since July 2020.
Weaker business confidence has now been recorded for five months running, largely reflecting subdued growth expectations for the UK economy, alongside uncertainty about the impact of higher interest rates and escalating inflationary pressures.
● An earlier post this week suggested that, despite economic challenges, the hire industry should remain positive.
