Construction sector growth slows in October , The latest PMI data suggested that output growth in the UK construction sector slowed sharply after hitting a 29-month high in September. , The UK Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted indicator that tracks changes in overall industry activity – came in at 54.3 in October, down from 57.2 in September. However, the index was above the crucial 50.0 no-change threshold for the eighth month running. The latest reading was also well above the average seen in the first half of 2024 (51.4) and indicated a strong expansion in overall industry activity.
The data suggested that output growth in the UK construction sector slowed sharply after hitting a 29-month high in September. The UK Construction Purchasing Managers’ Index (PMI®) – a seasonally adjusted gauge that tracks changes in overall industry activity – came in at 54.3 in October, down from 57.2 in September. However, the index was above the crucial 50.0 no-change threshold for the eighth month running. The latest reading was also well above the average seen in the first half of 2024 (51.4) and signalled a strong expansion in overall industry activity.
The civil engineering sector (56.2) was the best-performing sector on record in construction output in October. Survey respondents again pointed to rising demand across a range of energy infrastructure projects, particularly renewable energy. Commercial activity (52.8) also expanded in October, but the increase was the weakest since the current period of expansion began in April. Housebuilding (49.4) was the only broad category of construction to record an overall decline in output during October. This was the first decline in residential activity since June, but the rate of contraction was only marginal.
New orders growth in October
Total new work expanded at a solid pace in October. Reflecting the trend of output growth, the latest expansion was weaker than the two-and-a-half-year high seen in September. Political uncertainty and weak household demand due to cost-of-living pressures were cited as factors limiting new order growth in October. However, many construction firms noted strong sales pipelines and tender opportunities linked to generally improving domestic economic conditions.
The higher levels of new work encouraged additional staff to be hired in October. Furthermore, the rate of job creation accelerated to a three-month high. Stronger demand for staff was recorded despite lower business optimism about the outlook for growth in the year ahead. The latest data indicated that construction firms were the least confident in their output growth outlook since 2011.
December 2023. : Construction firms continued to boost their purchasing activity in October, mainly linked to higher workloads and upcoming new project starts. However, the latest increase in purchasing activity was only marginal and the weakest since the current phase of expansion began in May. Supplier delivery times improved slightly in October. Delivery times have now shortened in each of the past three months, often linked to high inventories among suppliers. Some construction companies noted that international shipping disruptions limited the latest improvement in supplier performance. Meanwhile, average cost burdens increased at a strong pace.
Inflation remained stronger than average in the first half of 2024, but has slowed since September. Survey respondents typically commented on rising raw material prices. Many companies suggested that the improved balance between supply and demand for construction inputs has increased competition among suppliers and helped to limit overall cost pressures.
Survey respondents reported broad-based comments
An overall increase compared to the previous month, and less than 50 indicates an overall decrease. The indicators are then seasonally adjusted. The headline figure is the Total Activity Index. It is a diffusion indicator that tracks changes in the total volume of construction activity compared to the previous month. The Total Activity Index is comparable to the Industrial Output Index and the Services Business Activity Index. It may be referred to as the “Construction PMI” but is not comparable to the headline Manufacturing PMI.
“The construction sector signaled another month of strong output growth in October, although it was unable to keep up with the high levels seen in September,” said Tim Moore, director of economics at S&P Global Market Intelligence. “The expansion in business activity was again driven by civil engineering work.
Respondents to the survey expressed widespread comments on the strong demand for renewable energy infrastructure projects.
“Commercial construction activity also increased again, albeit at the slowest pace since the current phase of expansion began in April. Improved domestic economic conditions helped boost demand, but some builders reported delaying spending decisions ahead of the autumn budget. Meanwhile, October data pointed to a decline in overall residential construction activity for the first time since June.
Government policy uncertainty, fragile consumer confidence and higher borrowing costs were all constraining demand for homebuilding projects.
“Total new work expanded at a solid pace in October, adding to signs of a strong improvement in the construction sector’s order book in the second half of 2024. As a result, builders added to their payrolls at an accelerating pace. However, business optimism remained relatively subdued compared to the highs of the first half of the year, with expectations for output growth now the lowest since December 2023.”
