The º£½ÇÊÓƵ's construction activity has dipped to a six-month low in December, as per a recent survey, with the sector losing momentum. The S&P's construction purchasing managers' index (PMI) indicates that housebuilding activity has further contracted, while growth in commercial and civil engineering work has slowed compared to the previous month.
Consequently, the overall PMI for December was 53.3, down from 55.2 in November, marking the lowest level since June. A score above 50 signifies expansion, as reported by .
Tim Moore, economics director at S&P Global Market Intelligence, stated that the deceleration in overall construction output growth mirrors more subdued demand conditions recently, as evidenced by a further moderation in new order growth during December. Companies cited "fragile" consumer confidence and uncertainty about future interest rate trajectories as factors contributing to the demand weakness.
Economic confidence has been dented post-Budget due to worries about the potential impact of the government's tax increases. Predictions indicate that these tax hikes may lead to persistent inflationary pressures, thereby maintaining higher interest rates for an extended period.
Money markets currently anticipate the Bank of England to reduce interest rates only twice in 2025. As demand weakens, companies have reduced input purchases for the first time in eight months, in some instances attributed to "tighter inventory management."
Construction companies are grappling with escalating cost pressures. The survey revealed that purchase prices rose at a "robust" rate in December, and subcontractors hiked their rates at the quickest pace in 20 months.
Despite an improvement in business confidence compared to November, it still lags behind the levels observed earlier in the year. "Confidence...was still much weaker than in the first half of 2024. Many firms reported worries about cutbacks to capital spending and gloomy projections for the º£½ÇÊÓƵ economy," Moore stated.
However, nearly half (48 per cent) of the firms surveyed anticipate an increase in output, while only 15 per cent foresee a decline.
