Data released by S&P Global / CIPS showed that activity in the construction sector improved in December, reaching a 4-month high. However, activity continued to contract, as weak order books meant a lack of new work to replace completed projects. Meanwhile, expectations of falling interest rates during the months ahead appear to have supported confidence levels among construction companies.
UK construction PMI rose to 46.8 points from 45.5 points in November. Economists had expected an increase to 46.0 points. The index remains below 50 points, indicating a reduction in activity in the sector, for the fourth month in a row.
The report showed that house building remained the weakest-performing segment (index at 41.1), despite the rate of decline easing to its slowest since July 2023. Civil engineering activity (index at 47.0) also posted a softer pace of contraction. Commercial construction declined only modestly (index at 47.6), but the speed of the downturn accelerated to its fastest since January 2021. The total volume of new orders in the construction sector declined again, but the rate of decline was the slowest since August 2023. Meanwhile, hopes for an improvement in demand conditions during 2024 contributed to the resumption of employment growth in December. However, the pace of job creation was only negligible. As for the inflationary situation, average cost burdens decreased for the third month running in December, albeit only modestly and at the slowest pace during this period. The data also pointed to somewhat optimistic business expectations of construction companies regarding output volumes in the coming year. About 41% of the survey participants expect business activity to grow during 2024, while only 17% predict a decline.