House building sees modest growth
6 October 2022
The fluctuations in the construction market caused by the current economic uncertainty are illustrated in the latest data in the Construction Purchasing Managers’ Index (PMI) survey compiled by S&P Global for the Chartered Institute of Procurement & Supply (CIPS).
Figures show that UK construction companies signalled a modest increase in business activity during September, which represented a return to growth after two months of falling output. However, subdued demand persisted, as signalled by the weakest trend for new orders since the post-lockdown recovery began in June 2020.
Looking ahead to the next 12 months, survey respondents remain cautious about their growth prospects. The degree of confidence towards the business outlook dropped to its lowest for over two years in September, mostly reflecting concerns about higher interest rates and a downturn in the wider UK economy.
At 52.3 in September, up from 49.2 in August, the headline seasonally adjusted Index registered above the 50.0 no-change value for the first time since June. The latest reading was the highest for three months and signalled a modest overall increase in construction output.
House building was the best-performing category in September (index at 52.9), with growth reaching a five-month high. Commercial work increased only marginally (51.0), while civil engineering activity (49.6) fell for the third month in a row.
Construction firms cited slow decision-making among clients and greater risk aversion due to inflation concerns, squeezed budgets and worries about the economic outlook.
Dr John Glen, chief economist at CIPS, commented: "The housing sector remained the strongest performer in September although with interest rates rising and mortgage costs affecting affordability rates especially for first-time buyers, this will be an obstacle for house building to keep up the momentum as we approach 2023."
