UK Construction Growth At 4-Month Low

The UK construction sector expanded at the weakest pace in four months in May, due to a significant fall in residential activity, survey results from S&P Global and the Chartered Institute of Procurement & Supply showed on Wednesday.

The CIPS construction Purchasing Managers’ Index fell to 56.4 in May from 58.2 in April. A score above 50.0 indicates expansion in the sector.

Among the three construction sectors monitored by the survey, housing activity registered its worst performance since May 2020, with the corresponding index falling from 53.8 in April to 50.7 in May.

Commercial building was the fastest-growing segment in May on strong demand conditions despite a degree of hesitancy due to the uncertain economic outlook.

Civil engineering activity rose for the fifth straight month amid a sustained boost from major infrastructure projects.

New orders grew at the slowest rate since December 2021, while construction companies raised their employment levels at the quickest pace in four months as they tried to boost capacity and meet rising consumer demand.

Higher demand forced firms to lift purchasing volumes in May. Efforts at stock replenishment and pre-purchase ahead of price rises were also the factors raising purchasing activity.

Cost inflation remained sharp in May despite easing to a three-month low in May, linked to higher costs for fuel, energy and raw materials.

On a positive note, supplier delays were reduced in May, which were the least widespread since February 2020.

Firms witnessed an improvement in the availability of raw materials, regardless of ongoing challenges including logistics bottlenecks, Brexit trade frictions and supplier staff shortages.

“The lack of positive sentiment was also reflected in construction companies’ confidence over the next 12 months, with optimism dropping to the weakest since August 2020 even though this was the best performing sector out of the three,” Duncan Brock, group director at CIPS, said.

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