Data released by S&P Global / CIPS showed that activity in the construction sector contracted again in March, but the pace of contraction slowed compared to February. Overall, construction companies remained cautious about their year ahead growth prospects, as fewer sales conversions and a third successive monthly reduction in total new work hit confidence levels. Overall business optimism slipped to its lowest since October 2023.
UK construction PMI rose to 46.4 points from 44.6 points in February (a 57-month low). Economists had expected an increase to 46.0 points. An index value below 50 points indicates a reduction in activity in the sector.
The report showed that all three categories of construction recorded a reduction in activity in March.
Civil engineering (index at 38.8) was the weakest-performing area of activity in March, with the rate of contraction accelerated to its fastest since October 2020. Residential construction activity declined at a slower pace than in February, but the respective seasonally adjusted index was still well inside negative territory (44.7). Commercial building (47.4) deceased only moderately in March. That said, the rate of contraction was the fastest since January 2021.
New orders in the construction sector fell again in March, while construction companies often noted a lack of sales enquiries and greater competition for new work. Meanwhile, employment also declined, with the pace of job shedding was the steepest since October 2020. As for the inflationary situation, higher payroll costs continued to push up average cost burdens. The overall rate of input price inflation accelerated to its strongest since January 2023. Meanwhile, lower workloads, elevated interest rates and worries about the broader economic outlook continued to weigh on business activity expectations in March. Confidence across the construction sector slipped to its lowest since October 2023.