Construction inches upwards but stays close to low point

The construction sector saw a very slight increase in October from September, edging above market expectations.

That’s according to the IHS Markit/CIPS UK Construction PMI which rose to 44.2 in October 2019 from 43.3 in the previous month.

The latest reading remained close to the ten-year low seen in June, as domestic political uncertainty and the economic slowdown continued to weigh on demand.

Civil engineering works contracted at the sharpest pace since October 2009 and house building also decreased at a faster rate. At the same time, commercial construction fell for the tenth month running, but at the slowest rate since May.

Overall new orders dropped for the seventh month in a row, resulting in another fall in employment. On the price front, input cost inflation was the lowest for three-and-a-half years. Looking ahead, business confidence remained among the weakest seen since 2012. Some construction firms noted that contract awards related to large-scale civil engineering projects had the potential to boost workloads in the next 12 months, although political uncertainty continued to cloud the outlook.

Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey said: “UK construction companies experienced a downturn in business performance during October as political uncertainty and subdued economic conditions again combined to hold back sales. New orders have fallen in each month since April, which is the most prolonged period of decline recorded for more than six years.

“Civil engineering was the worst-performing area of activity in October, with business activity dropping at
the fastest pace in ten years. Construction companies also voiced concerns about the uncertain outlook for
large-scale infrastructure projects upon which growth is expected to rest in the coming years.

“House building has also lost momentum this autumn amid a broader slowdown in market conditions, with
the latest survey data signalling the sharpest drop in residential work since June 2016.

“There are clear signs that construction firms are positioning for an extended soft patch for project starts, as highlighted by a further decline in purchasing volumes and another month of cuts to workforce numbers through the non-replacement of voluntary leavers.”