The construction PMIs upturn in output is offset by an easing of new orders, with business activity expectations being the least optimistic since October 2023
The November PMIs saw a tracker rating of 55.2, up from October’s 54.3, demonstrating an acceleration in the expansion of overall construction activity.
This also marks the ninth month in a row where the headline index rating has been above the neutral 50.0
November PMIs show “the strongest rise in commercial work for two-and-a-half years”
Indexed at 58.1, the respondents to the PMI survey noted the improvement in customer demand and new opportunities to tender, albeit tempered by subdued economic conditions.
Civil engineering activity also expanded in November to 55.9, although the rate of growth fell to the lowest in three months.
On the other side of the spectrum, house-building remained the lowest category of November’s construction work at 47.9. This is the second month running that house-building has held this position, with the fastest rate of decline since June.
Survey respondents cited similar issues, with higher borrowing costs and low consumer confidence affecting their business and demand conditions.
New business volumes across the construction sector also increased for the tenth successive month. However, the rate of growth also slipped to the lowest since June. Some reported that this was due to political and economic uncertainty, in particular the Autumn Budget, affecting client confidence. New projects in the commercial sector were most frequently linked with growth.
Employment numbers saw a modest rise, with job creation easing to a three-month low. Some evidence suggests that an increase in employment costs is a key factor for preventing staff hiring, however this is not definitive for the whole sector.
Some construction company respondents stated that a greater utilisation of sub-contractors helped to manage rising costs, and was supported by an increase in sub-contractor usage for the first time since July. Still, the sharpest climb in sub-contractor charges for 16 months was also seen in this month-period.
Rate of growth in purchasing activity at the slowest pace in months
Purchasing activity saw the slowest pace of growth since the current phase of expansion began in May due to a loss of momentum in new order growth.
Supplier performance also deteriorated at the most rapid pace since February 2023, with transportation and international shipping issues being cited as the key reasons for disruption.
43% of the survey panel predict an increase in construction business activity during the next year, with 21% predicting a reduction. This shows that while optimism remains, it has been at a diminished rate since October and is at its lowest level in 13 months. Worries about the UK’s economic outlook and impact on business investment due to rising employment costs are often cited for this downturn in optimism.
Tim Moore, economics director at S&P Global Market Intelligence, commented on the November PMIs: “The construction sector bucked the slowdown seen elsewhere across the UK economy in November, according to the latest S&P Global PMI survey. Total industry activity once again expanded at a robust pace and there has been a clear acceleration in growth compared to that seen in the first half of 2024.
“However, the recovery in construction activity remains somewhat lopsided. Strengthening demand for commercial work and civil engineering projects contrasted with a sustained downturn in house building. Commercial construction activity expanded at the fastest pace for two-and-a-half years in November, while residential work declined at the steepest rate since June. Elevated borrowing costs and fragile client confidence meanwhile acted as a brake on new order growth in November, with the upturn in sales the slowest for five months.
“A loss of momentum for new work, alongside concerns about rising employment costs, resulted in weaker job creation and falling business optimism across the construction sector. The degree of positive sentiment regarding year-ahead growth prospects dropped to the lowest since October 2023. Many construction companies cited concerns about the near-term UK economic outlook and subsequent cutbacks to new projects.”
