Data published by S&P Global/CIPS showed that activity in the construction sector reduced in July (for the first time since January 2021), which was due to a drop in residential construction and civil engineering.
UK construction PMI fell in July to 48.9 points from 52.6 points in June. The last value was the lowest since May 2020. Economists had expected the index to decline to 52.0 points. An index value below 50 points indicates a reduction in activity in the sector.
According to the report, the index of activity in the civil construction sector fell to 40.1 points, recording the largest decline since October 2020. The index of activity in the housing construction sector amounted to 49.4 points, demonstrating the second monthly reduction in a row. Meanwhile, the index of activity in the commercial construction sector amounted to 52.3 points (an 18-month low). Survey respondents commented on headwinds to client demand from rising inflation, fragile consumer confidence and higher interest rates.
New orders rose again in July (for the 26th consecutive month), but the growth rate was noticeably weaker than the average in the first half of 2022. As a result, some construction companies cited a lack of new projects to replace completed contracts. Meanwhile, the number of employed grew at a steady and accelerated pace. Meanwhile, the purchasing price index fell to 78.1 points from 85.8 in June, with the latest rise in cost burdens the least marked since March 2021. About 22% of respondents reported longer delivery times from suppliers in July, and 7% noted an improvement. Overall, supplier delays have been the least widespread since February 2020.
Meanwhile, business optimism remained subdued across the construction sector, with growth expectations well below those seen in the opening months of 2022. That said, the degree of positive sentiment picked up slightly from June's 23-month low. Concerns about the recession, the cost-of-living crisis and declining consumer confidence were the most frequently cited factors affecting business expectations in July.