UK Construction Growth Weakest In 10 Months

UK construction growth eased further in January to its weakest level in ten months, amid tepid growth in new orders that lead to the weakest employment growth in more than two years, amid the Brexit uncertainty, survey data from IHS Markit showed on Monday.

The headline construction Purchasing Managers' Index fell to 50.6 from 52.8 in December. Economists had forecast a score of 52.5. A PMI reading above 50 suggests growth in the sector.

The index has posted above the 50.0 no-change mark in each month since the snow related decline seen in March 2018, but the latest expansion was the weakest seen over this ten month period of growth, IHS Markit said.

New order growth was at an eight-month low in January, thanks to softer demand conditions and longer sales conversion times. The latter suggested a wait-and-see approach to spending by clients as they wait for the uncertainty around Brexit to clear.

Slower order growth lead to the slowest expansion of employment numbers for two-and-a-half years.

Several survey respondents noted that Brexit uncertainty had led to hesitancy among clients and a corresponding slowdown in progress on new projects, the survey said.

In January, all three categories of construction output recorded weaker trends than those reported in December.

Residential work remained the strongest performing area despite modest expansion in January which was the slowest since March 2018. Civil engineering growth slowed sharply from December's 19-month high.

The weakest performing area of construction was commercial work with latest data suggesting a decline in work for the first time in ten months.

Anecdotal evidence suggested that Brexit-related anxiety and associated concerns about the domestic economic outlook continued to weigh on client demand for commercial construction, IHS Markit said.

The survey also showed that input buying growth slowed and vendor performance was the joint-weakest since September 2016.

Input price inflation was the slowest since June 2016, largely driven by rising prices for imported construction products and materials.

Despite the recent weakness in growth, construction firms remained positive about the outlook for business activity this year with around 41 percent of the survey panel expecting a rise in output and only 16 percent forecasting a fall. However, confidence eased slightly from December.

Big civil engineering projects were cited as a key source of optimism, while Brexit remained the main concern.