UK construction activity posts biggest drop since May 2020

UK construction activity posts biggest drop since May 2020 -PMI

Construction activity in Britain fell last month at its steepest pace since May 2020, as new orders dried up amid rising interest rates and broader cost pressures, a survey showed on Friday.

The S&P Global/CIPS Purchasing Managers’ Index (PMI) for the construction sector fell to 48.8 in December from 50.4 in November, well below the median forecast of 49.6 in a GLM survey of economists. and below the 50 level that separates growth from contraction.

“The UK construction sector posted a relatively weak end to 2022, with activity falling into decline after a three-month run of growth, amid the fastest contraction in new jobs since the early period of the pandemic in May 2020,” said Lewis Cooper, an economist at S&P.

The UK construction sector had performed well at the start of 2022, with output rising 7.4% in the year to October, according to official data.

However, Bank of England interest rates have risen sharply – reaching their highest level in 14 years at 3.5% in December – and house prices have recently started to fall. Last month, the leading mortgage bank, Halifax, forecast an 8% drop in house prices by 2023.

The construction PMI showed declines in both home construction and civil engineering works. The former fell at the fastest rate since May 2020, while the latter has been declining since July.

Commercial projects rose slightly, but global employment fell for the first time since January 2021, when widespread COVID-19 lockdown restrictions took place.

The Bank of England estimates that the UK has entered what is likely to be a shallow but potentially prolonged recession as rising inflation and the higher interest rates needed to combat it weaken consumer demand.

The PMI construction index, which measures input cost inflation, fell to its lowest level in two years in December but remains well above pre-pandemic levels.

Friday’s cross-sector PMI — which includes the services and manufacturing data released earlier this week, as well as the construction figure — rose to 49.0 in December from 48.4 in November, but has been below 50. Since August.

Melissa Galbraith
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