One sentence summary – The UK construction sector experienced a slight decline in August, primarily due to a slump in house building, but overall growth remained positive, with commercial and civil engineering segments offsetting the decline; however, concerns about the near-term economic outlook and rising risk aversion led to a decrease in new orders and reduced optimism for future business activity.
At a glance
- The S&P Global / CIPS UK Construction Purchasing Managers’ Index (PMI) declined from 51.7 in July to 50.8 in August.
- The decline in PMI was attributed to a slump in house building, but commercial and civil engineering segments experienced growth.
- Total new order volumes experienced a decline for the second time in three months, primarily driven by concerns about the economic outlook and borrowing costs.
- The construction sector as a whole remained in expansion mode, with resilient demand for commercial work and infrastructure projects offsetting the decline in residential activity.
- However, forward-looking indicators showed worries about the economic outlook, with the fastest decline in new orders in over three years and a slowdown in job creation.
The details
The S&P Global / CIPS UK Construction Purchasing Managers’ Index (PMI) recorded a slight decline in August, dropping from 51.7 in July to 50.8.
Despite this decrease, the index remained in positive territory, indicating ongoing growth in the sector.
Decline in PMI
The decline in the PMI was attributed to a slump in house building.
This was offset by growth in the commercial and civil engineering segments.
Construction companies noted subdued market conditions and rising interest rates as the primary factors contributing to the decline in residential building activity.
The recent downturn in residential work was the steepest observed since spring 2009.
Falling sales volumes across the construction sector also played a role in the decline in business activity.
Decline in Order Books
Total new order volumes experienced a decline for the second time in three months.
August saw the steepest downturn in order books since May 2020.
This decline was primarily driven by concerns about the near-term economic outlook and elevated borrowing costs.
These factors led to more cautious spending among clients, particularly in residential building.
Challenges and Outlook
Despite the challenges faced by the residential segment, the construction sector as a whole remained in expansion mode.
Resilient demand for commercial work and infrastructure projects helped offset the decline in residential activity.
However, the survey’s forward-looking indicators painted a more concerning picture for the future.
Total new orders decreased at the fastest pace in over three years.
This reflects worries about the broader economic outlook and rising risk aversion.
Job creation within the construction sector lost momentum compared to the previous month.
This slowdown in hiring activity was influenced by the challenges faced by the residential segment and the cautious approach adopted by construction firms.
Business activity forecasts for the year ahead were the weakest since January.
This indicates a sense of caution within the industry.
Construction firms reduced their output growth projections due to rising risk aversion and concerns about the economic landscape.
In August, the UK construction sector experienced mixed performance.
While the overall index remained positive, the decline in house building activity, falling sales volumes, and a downturn in new order volumes raised concerns about the near-term economic outlook.
Resilient demand for commercial work and infrastructure projects provided some stability.
However, cautious spending and rising interest rates continued to impact the residential segment.
Construction firms expressed reduced optimism for future business activity.
This reflects an uncertain landscape and rising risk aversion.
All information in this brief is derived from various reliable sources.
The aim is to provide a comprehensive overview of the news story in a neutral and unbiased manner.
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| constructionenquirer.com |
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| – The S&P Global / CIPS UK Construction Purchasing Managers’ Index was 50.8 in August, down from 51.7 in July. – |
| Despite the decline, the index remained in positive territory in the sentiment index. – Growth in the commercial and civil engineering segments helped offset a slump in house building. – Business activity forecasts for the year ahead were the weakest since January. – Job creation lost momentum compared to the previous month. |
| – Falling sales volumes across the construction sector contributed to the decline in business activity. |
| – Total new order volumes declined in August for the second time in the past three months. – |
| The downturn in order books was the steepest since May 2020. – Rising interest rates and concerns about the near-term economic outlook led to more cautious spending among clients, particularly in residential building. – Construction companies noted a slump in house building activity due to rising interest rates and subdued market conditions. – |
| The recent downturn in residential work was the steepest since spring 2009. |
| – Resilient demand for commercial work and infrastructure projects helped keep the construction sector in expansion mode. |
| – However, the survey’s forward-looking indicators worsened in August. |
| – Total new orders decreased at the fastest pace in over three years due to worries about the broader economic outlook and elevated borrowing costs. |
| – Construction firms reduced their output growth projections due to rising risk aversion. – Business activity expectations slipped to the weakest since January. |
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