Construction output shows decline
4 August 2022
Figures for July shows that there was an overall reduction in UK construction output for the first time since January 2021.
The Construction Purchasing Managers’ Index (PMI) survey, compiled by S&P Global for the Chartered Institute of Procurement & Supply (CIPS), measures month-on-month changes in total industry activity and recorded 48.9 in July. This is down from 52.6 in June and below the 50.0 no-change threshold for the first time since January 2021.
House building declined for the second month running, but the rate of contraction was only slight with the index at 49.4. Commercial work bucked the downturn at 52.3, although growth was the for 18 months. Civil engineering was the worst-performing segment in July, at 40.1, which dragged the overall average down.
Survey respondents commented on headwinds to client demand from rising inflation, fragile consumer confidence and higher interest rates.
More positively, July data indicated an overall rise in new orders for the twenty-sixth consecutive month, although the increase was notably weaker than the average in the first half of 2022. As a result, some construction companies cited a lack of new projects to replace completed contracts.
Purchase price inflation eased considerably, with the index of 78.1 down from 85.8 in June, with the latest rise in cost burdens the least marked since March 2021. However, construction firms noted upward pressure on business expenses from higher energy, fuel and transport costs, partly offset by some easing in commodity prices, especially for metals and timber.
Business optimism remained subdued across the construction sector in July, with growth expectations well below those seen in the opening months of 2022. However, the degree of positive sentiment picked up slightly from June's 23-month low. Around 42 per cent of the survey panel anticipate a rise in output during the year ahead, while only 15 per cent forecast a decline.
● The FTSE 100 house builder Taylor Wimpey yesterday reported an “excellent financial and operational performance” in its half year results. Jennie Daly, CEO, said: “Demand for our homes remains strong and we now expect full year Group operating profit to be around the top end of the current market consensus range.”
