House building holds back construction growth

The headline S&P Global/CIPS UK Construction Purchasing Managers’ Index registered 56.4 in May – down from 58.2 in April and the lowest reading for four
months.

It was still in growth territory above the crucial 50 no-change mark but business activity expectations at construction companies were the least upbeat since August 2020.

Buyers reported the worst performance for residential work since May 2020 while commercial building was the fastest-growing segment last month while civil engineering activity increased for the fifth month running and at a robust pace.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “Though still offering a comfortable margin above the no change mark, the construction sector saw growth ease to a four-month low with the usual suspects taking the heat out of the recovery – elevated inflation, future uncertainty and supply-chain disruption.

“Supply chain managers scaled up purchasing levels to beat expected price increases in the months ahead as inflation rates remained powerfully strong even with the
slight easing in prices.

“There was also robust job hiring in May so businesses could secure the best talent from a dwindling pool of skilled candidates to build capacity for the remainder of the year.

“Subdued client confidence affected new order levels with the slowest rise in pipelines of new work since December 2021. The housing sector in particular showed
further signs of fragility with the worst performance since May 2020 and moving closer to the danger zone of negative territory.

“Affordability concerns will be weighing on the mind of potential house buyers grappling with escalating costs for everyday items, resulting in a postponement of big purchases until the UK economy shows more resilience.

“The lack of positive sentiment was also reflected in construction companies’ confidence over the next 12 months, with optimism dropping to the weakest since August 2020.”

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