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2022 / 2023 Edition

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Construction growth eases to three-month low

TAI

Solid increase in business activity in December, but rate of expansion lowest since September

PURCHASING Managers’ Index (PMI) data pointed to another solid increase in business activity across the UK construction sector in December, but the rate of expansion slipped to its lowest since September.

The headline seasonally adjusted IHS Markit/CIPS UK Construction PMI Total Activity Index posted 54.3 in December, to remain above the crucial 50.0 no-change threshold. However, the latest reading was down from 55.5 in November and signalled the weakest rate of expansion for three months.

Some survey respondents noted that tighter pandemic restrictions and rising COVID-19 cases had acted as a brake on recovery, especially in the commercial sector.

Residential construction activity saw the strongest growth (index at 55.3) and was the only category to gain momentum in December. Commercial building lost its position as the best- performing segment, with the recovery easing to its lowest since September (index at 53.6).

Meanwhile, civil engineering activity decreased slightly at the end of 2021 (index at 49.1), ending a nine-month period of expansion.

Despite some reports citing delayed decision-making due to the Omicron variant, customer demand was relatively resilient in December, with the latest rise in overall new order volumes the strongest since August. Higher levels of new work have now been recorded for 19 consecutive months.

Looking ahead, just over half of the survey panel (51%) forecast a rise in business activity during 2022, whilst only 9% predict a decline. Although signalling upbeat sentiment for the year ahead, the degree of optimism was the joint-lowest reported since January 2021.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: ‘Though the overall index moved down slightly in December there was light at the end of the tunnel for builders in terms of the strongest order numbers since August, reduced pressure on business costs and some improved delivery times for essential materials.

‘Residential building has powered on every month since June 2020 and was the best performing category in the last month of 2021, whilst commercial building struggled to gain a stronger footing in a weakened UK economy and civil engineering activity fell back into contraction.’

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