U.K. construction output falls at slower pace in January, PMI index rises to 48.4

U.K. construction output has fallen at a much slower pace in January than seen in December 2019. The headline seasonally adjusted IHS Markit UK construction total activity index rose to 48.4 in January from December’s 44.4. Today’s reading is still below the 50.0 no-change threshold, but hinted at the slowest fall in overall construction output for eight months. House building was the best performing wide area of construction activity, with output falling slightly in January. The residential work also fell at the slowest rate since May 2019.

Commercial activity fell for the 13th straight month in January; however, the pace of contraction was softer than in December and the weakest since the beginning of 2019. Several survey respondents noted that reduced domestic political uncertainty had the potential to unlock new projects and give additional boost to client spending.

In the meantime, civil engineering was the worst performing category of output in January, with construction companies often citing a lack of tender opportunities to help replace completed infrastructure contracts. Data for January indicated just a slight fall in new orders received by construction firms. The pace of new business contraction alleviated sharply since December and was the least marked in the current ten-month period of fall. Anecdotal evidence implied that greater clarity in relation to Brexit following the general election had a positive effect on demand, especially in the residential development category.

The latest survey indicated towards a modest extent of pressure on supply chain capacity, with lead-times from vendors lengthening a bit despite a fall in purchasing volumes at the beginning of 2020. However, sub-contractor availability rebounded for the first time since last September and at the most rapid rate for three-and-a-half years. Average cost burdens rose at a most strong and accelerated pace in January. The latest rise was the sharpest since July 2019. Survey respondents commented on higher fuel and haulage costs, alongside increased prices for imported construction inputs.