Construction industry PMI falls to eight-month low

UK construction industry’s Purchase Managers Index (PMI) continued to weaken in August to its lowest level in eight months amid concern that the industry is grinding to a halt.

The latest PMI figures supplied by Markit and the Chartered Institude of Purchasing & Supply (CIPS) showed a drop from 53.5% in July to 52.6% in August.

Improved performance from the commercial industry was outweighed by a weaker rise in civil engineering work. The housing sector showed signs of recovery despite posting a negative figure for the month. Staffing levels and contractor use also fell during the month.

The latest PMI figures released by Markit coincide with an unprecedented fall of 16.3% in new construction orders during Q2 compared to Q1 according to the latest update by the Office of National Statistics. The total level of orders currently stands at its lowest level for 47 years.

Despite the gloomy figures, 34% of UK constructors anticipate growth in the next year as a result of increased demand.

Sarah Bingham, economist at Markit said: “August data signalled slower growth of both output and new orders as headwinds caused by uncertain economic conditions impacted on sector performance.

“Confidence regarding future business expectations weakened to an eight-month low, highlighting concerns in respect of further potential cuts in government spending, but also a dampening of wider business sentiment.

“A further marked rise in input costs faced by constructors was again recorded in August, suggesting that overall operating conditions remain tough, especially as strong competition for tender opportunities remained.”

Commenting on the report, David Noble, chief executive officer at CIPS said: “Reality is continuing to bite in the UK construction sector, as worries over wider economic conditions contribute to a slower rate of output growth.

“Although over a third of panellists anticipate growth of activity in the coming year, the overall level of positive sentiment remains far below that seen at the start of the recovery.

“The housing sector also continues to be a worry, with a fall in the number of residential projects adding to an already sluggish picture for the sector. Though overall activity is still in growth territory, there may be some question about whether this will continue for much longer.”