Data released by S&P Global / CIPS showed that activity in the construction sector rose sharply last month, reaching its highest level since August 2023. Overall, construction companies seem increasingly optimistic that the worst could be behind them soon as recession risks fade and interest rate cuts appear close on the horizon.
UK construction PMI rose to 48.8 points from 46.8 points in December. Economists had expected an increase to 47.3 points. However, the index remains below 50 points, indicating a reduction in activity in the sector, for the fifth month in a row.
The report showed that civil engineering was the best-performing segment in January (index at 49.8). Commercial activity also showed some resilience (index at 49.1). Meanwhile, house building continued to fall sharply at the start of 2024 (index at 44.2). Survey respondents noted subdued demand conditions and a lack of work to replace completed projects. New orders fell again in January (for the 6th month in a row), but the rate of decline slowed to a 6-month low. Companies reporting a reduction in new orders usually cited delayed customer decision-making and poor market conditions, especially in the residential construction segment. However, the data indicated a sharp increase in business activity expectations. About 51% of respondents predict an increase in business activity in the coming year, while only 12% predict a decrease. This indicates the highest level of business optimism since January 2022. Lower borrowing costs and increased consumer confidence were cited as factors that could boost construction activity during 2024. Meanwhile, construction companies remained cautious about hiring staff in January - the total number of employees decreased slightly. The data also indicated a renewed increase in purchasing prices across the construction sector, following three months of falling costs. The latest survey signaled a solid rise in input costs that was the fastest since May 2023.