The latest S&P Global UK Construction Purchasing Managers’ Index™ (PMI®) report reveals that the UK construction sector maintained its growth as the second quarter of 2024 concluded. However, the pace of expansion slowed down, influenced by a notable decline in housing activity and slower growth in new orders, potentially linked to the ongoing election uncertainty.
Key Findings
Construction Activity
- PMI Reading: The headline PMI registered at 52.2 in June, down from 54.7 in May, marking the fourth consecutive month above the 50.0 no-change mark. This indicates sustained growth, albeit at a slower pace.
- Sector Performance: Commercial activity continued to be the primary growth driver, while civil engineering activity saw a modest increase. In contrast, housing activity experienced a solid decline after a brief increase in May.
New Orders and Employment
- New Orders: The rise in new orders persisted for the fifth consecutive month but at the slowest rate since February. Election-related uncertainties were cited as a factor in the reduced inflow of new work.
- Employment: Despite slower new orders, construction firms increased staffing levels for the second consecutive month, achieving the sharpest rise in employment in ten months.
Inflation and Supply Chain
- Input Cost Inflation: The rate of input cost inflation increased from May but remained relatively muted.
- Supply Chain: Favorable supply-chain conditions encouraged firms to expand their purchasing activities.
Andrew Harker, Economics Director at S&P Global Market Intelligence, in an official news release stated, "Continued growth of the UK construction sector in June meant that the sector has recorded sustained expansion throughout the second quarter of the year. While there were signs of a slowdown in the latest survey period, most notably around housing activity, firms indicated that a slowdown in new order growth was in part related to election uncertainty. We may therefore see trends improve once the election period comes to an end."
"Moreover, confidence in the year ahead outlook remained strong and firms increased employment to the largest extent in ten months."
In terms of inflation, there remains little sign of cost pressures picking up to any great extent, encouraging firms to expand purchasing activity. Supply-chain conditions also remained favourable." He added.
The UK construction sector demonstrates resilience and adaptability in the face of political and economic challenges. The ongoing growth, particularly in the commercial sector, and the robust job creation are positive indicators. However, the decline in housing activity and slower new order growth highlight areas of concern that may need addressing post-election.
