Construction PMI hits lowest level since October 2009
The latest monthly survey of construction’s purchasing managers shows that new work has now fallen for nine consecutive months.
It suggests a great reduction in total construction output led by declines in commercial and civil engineering activity.
Despite this, there’s more optimism around concerning the year ahead.
The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) dropped to 46.8 in February, down from 48.7 for January. Anything below 50 indicates shrinkage in place of growth and the index has posted below the neutral 50.0 value in all the past four months. The most recent score signals the fastest pace of contraction since October 2009.
The fall in construction output reflected a return to declining levels of business building work and a pointy decrease in civil engineering activity. Commercial construction decreased on the steepest pace for greater than three years, while the most recent reduction in work on civil engineering projects was the fastest since October 2009. This offset a rise in housing activity in February, with the marginal expansion in residential building the primary improvement since May 2012.
UK construction firms highlighted an ongoing deterioration of their new order inflows throughout the latest survey period. Lower levels of latest work was recorded in every month since last June, reflecting cuts to client budgets and intense competition for brand new work. Nonetheless, employment numbers rose fractionally in February, contrasting with the downward trend seen in the course of the final three months of 2012.
Reduced new business volumes contributed to an extra decline in purchasing activity at construction companies. Input buying has now fallen for nine consecutive months.
Looking ahead, construction companies (on balance) anticipate a diffusion of economic activity at their units over the following 365 days, with the degree of positive sentiment the strongest since last April. Survey respondents cited hopes that new sales and marketing strategies, alongside a general rise in new invitations to tender, will boost business activity over the year ahead.
Markit senior economist Tim Moore, who compiled the survey on behalf of the Chartered Institute of buying & Supply (CIPS), said: “This is undoubtedly a dark set of knowledge for the united kingdom construction sector, especially the pointy falls in commercial building work and civil engineering activity.
“With total output falling on the steepest pace for over three years, the most recent PMI survey is confirmation that January’s construction decline was not entirely snow-related. Downward pressure on client budgets, alongside subdued public sector spending, again caused lower output levels and reduced new order inflows.
“The only exception to the whole output trend was a stabilisation in residential construction, with eight months of sustained decline ending in February. Moreover, construction companies cited new house building projects as a place having some potential to reinforce UK construction output over the following year.”
CIPS chief executive David Noble said: “There is simply a crumb of comfort on this month’s figures for the development industry to ease the ongoing decline in performance. The dramatic fall in civil engineering activity is very worrying, having been the single bright spot inside the second 1/2 2012. Whilst the housing sector has registered mild growth for the primary time in nine months, it remains weak compared with its long-term average. To feature insult to injury, commercial activity declined at a worrying pace.”
Market’s findings prompted a swift cry from the Civil Engineering Contractors Association for chancellor George Osborne to bail out the development industry. CECA director of external affairs Alasdair Reisner said: “While care ought to be taken to not put an excessive amount of weight on one set of statistics, the steep decline within the CIPS figures should raise a note of outrage. The development sector is prime to the government’s recovery strategy, and yet it currently languishing in an anaemic condition, showing only weak or negative growth. If the chancellor is to accomplish his goal of kick-starting growth through infrastructure provision, it’s important that he is taking the mandatory steps to extend workloads and unblock smaller local infrastructure projects straight away.”