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Construction optimism picks up despite sluggish end to 2018

3 January 2019

Optimism among construction buyers increased in December, despite a “disappointing” end to the year in terms of business activity, according to the latest IHS Markit / CIPS UK Construction PMI.

The index, which surveyed purchasing managers from around 150 construction companies, recorded a score of 52.8 in December 2018, down from 53.4 in November, where any reading above 50.0 indicates an overall increase in activity compared to the previous month.

That represented the ninth consecutive month above the no-change value, although it was the slowest rate of expansion seen since September.

The survey found that the main bright spot was a sustained rebound in civil engineering activity, although there were softer rises in commercial and housing activity during December. Anecdotal evidence suggested that subdued demand was the main factor, while there were also reports that unusually wet weather had acted as a brake on construction work.

Total new business volumes picked up for the seventh successive month but the rate of expansion eased since November.

Nonetheless, the degree of business confidence was the highest since last April and well above the six-year low recorded in October. Respondents cited hopes of a boost to growth from work on big-ticket transport and energy infrastructure projects in 2019.

Tim Moore, economics associate director at IHS Markit, which compiles the survey said: “Construction companies indicated a renewed loss of momentum in December. Residential growth remains much softer than the two-and-a-half year peak achieved last summer.

“Civil engineering was the stand-out area of construction growth in December, with activity rising at the fastest pace since May 2017. Survey respondents also noted that the strengthening infrastructure pipeline is set to become a key engine of growth in 2019, despite concerns about possible delays to the delivery of major projects.

“Construction sector confidence was also helped by softer input cost inflation and signs of a turnaround in supply chain difficulties from the low point seen last August. However, levels of optimism remained subdued in relation to those recorded by the survey over much of the past six years, largely reflecting concerns that Brexit uncertainty will continue to encourage delays with decision-making, especially on commercial projects."

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