Construction activity in the UK dipped for the second successive month in August as customer demand moved closer to stagnation amid cost pressures and economic uncertainty.
The S&P Global/CIPS UK Construction Purchasing Managers’ Index (PMI) was 49.2 in August, up fractionally from 48.9 in July but still below the 50.0 no-change mark and thus signalling a reduction in construction activity over the month, the second monthly fall in a row.
Concerns about wider economic prospects led to a drop in business confidence and slower job creation, while firms' purchasing activity declined.
Falling buying activity did alleviate some pressure on supply chains, with lead times lengthening to the least extent in two-and-a-half years, while inflationary pressures also showed signs of waning.
Martin Beck, chief economic advisor to the EY ITEM Club, said “After a weak set of PMIs from the services and manufacturing sectors, August’s construction PMI followed suit.”
“The near-term outlook for construction appears challenging” he cautioned adding that the cost of living crisis is likely to weigh on housing market activity and reduce demand for home improvements.”
Costs and prices continued to rise at historically strong rates he noted reflecting higher prices for cement, steel and other raw materials and rapid growth in pay.
But Beck did point out that “The Government plans to boost spending on infrastructure as a share of GDP to a multi-decade high, linked in part to the levelling-up agenda, while the housing market which, while slowing, is unlikely, in the EY ITEM Club’s view, to shrink.”
“But, as with the rest of the private sector, prospects for construction over the rest of this year and into 2023 will depend heavily on the as-yet-unknown scale and coverage of government support to offset climbing energy bills.”