Construction industry suffers as housebuilding activity falls in January
The Markit/CIPS UK Construction purchasing managers’ index (PMI) recorded a reading of 50.2 in January.
Activity in Britain’s construction sector came within of whisker of stagnation last month, sliding to a four-month low as housebuilders endured a tough start to the year.
The Markit/CIPS UK Construction purchasing managers’ index (PMI) recorded a reading of 50.2 in January, down from 52.2 in December, with economists predicting a figure of 52.0.
A reading above 50 indicates growth.
In a gloomy update, the industry saw housebuilding activity shift into reverse and growth in commercial and civil engineering stutter as market uncertainty took its toll on new orders.
It comes after output in the manufacturing industry unexpectedly slipped in January as the industry grappled with a double-whammy hit of slowing growth and escalating costs.
Sterling was down 0.3% to 1.421 against the US dollar following the announcement, while the euro slipped 0.2% to 1.138.
Sam Teague, economist at IHS Markit, said: “January’s PMI data indicated a difficult start to 2018 for the UK’s construction sector, underlined by business activity growth slumping to a four-month low and new orders sliding back into decline.
“A contraction in house building added to lacklustre commercial building and civil engineering markets, and reduced inflows of new work suggest overall activity could slip into decline in February.
“Furthermore, cost pressures remained intense, fuelled by shortages of input materials and high costs for imported products.”
Employment was also struggling across the industry, drifting to an 18-month low in response to the fall in activity.
Despite the cheerless performance, firms said they were feeling more confident about future growth and expected a jump in the number of new projects.
Howard Archer, EY Item Club’s chief economic adviser, said: “The muted January construction PMI follows on from a softer manufacturing survey.
“This is disappointing for hopes that the economy can sustain the improved performance seen in the fourth quarter of 2017 (when GDP grew 0.5% quarter-on-quarter) but much will depend on how the dominant services sector is faring.
“Persistent economic, political and Brexit uncertainties are clearly hampering the construction sector, as is limited activity in several sectors of the economy. The construction sector is also being hampered by high input costs.
“The residential sector has recently been the clear bright spot for the construction sector but it suffered a relapse in January.”
The PMI update comes after the latest slew of official data showed Britain’s economy unexpectedly rose in the fourth quarter.
The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.5% in its initial estimate for October to December, following growth of 0.4% in the third quarter.