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Construction growth softens as house-building falters again

Posted: Friday, July 5th, 2024

The headline S&P Global UK Construction Purchasing Managers’ Index (PMI) registered 52.2 in June, down from 54.7 in May but above the 50.0 no-change mark for the fourth consecutive month, The Construction Index reported.

The main growth driver continued from commercial activity, which increased in June.

However, the rate of expansion softened from May's two-year high. A slower increase in civil engineering activity was also recorded, with output up modestly.

The only category to record a drop-in activity was house building, where output fell solidly following the first increase in 19 months during May.

Anecdotal evidence suggested that the expansion in total activity reflected securing new contracts during the month.

Data on new orders showed a fifth consecutive monthly expansion amid successful tendering and increased client activity.

That said, new business's growth rate has been modest and slow since February. Some respondents indicated that uncertainty caused by the general election's call had caused new work inflows to slow.

Despite a softer expansion in new orders, construction firms responded to greater workloads by taking on additional staff for the second month. Moreover, the rate of job creation was solid and the sharpest since August last year.

Rising new orders also led firms to increase their purchasing activity for the second month, with the expansion rate slightly changing from that seen in May.

However, there remained little sign of pressure on supply chains, with vendor delivery times shortening for the 16th consecutive month.

Meanwhile, input costs rose only slightly in June as some suppliers limited price rises to secure new business.

The inflation rate ticked higher amid rising costs for some raw materials but remained well below the series average. Meanwhile, subcontractor rates increased modestly and slowly in four months.

Confidence in their ability to secure new contracts over the coming year supported continued optimism in the 12-month outlook for construction activity in June.

Expectations that interest rates will start to decrease also contributed to positive sentiment. More than half of respondents predicted increased construction activity, with confidence broadly in line with that seen in May.

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