MNI DATA: UK Construction PMI At 10-Month Low In Jan

--CIPS/IHS Markit UK Construction PMI 50.6 in Jan vs 52.8 in Dec

By Jai Lakhani

     LONDON (MNI) - The UK CIPS/IHS Markit construction sector PMI dropped 2.2

points to a 10-month low 50.6 in January, down from 52.8 in December, a report

published Monday showed. 

     The reading, whilst above the 50 change/no change mark, is a notable drop

suggesting the sector struggled at the start of 2019. 

     Construction activity showed a loss in momentum, with business activity

growth also at its weakest for ten months. As a result of a marginal increase in

new orders, employment numbers expanded for two-and-a-half years. 

     All three categories of construction output recorded weaker trends than

those reported in December. Civil engineering activity reversed from its

19-month high in December, up marginally. Furthermore, whilst residential work

was the best performer, it expanded modestly and at the slowest rate since March

2018. 

     --COMMERCIAL WORKD FALLS

     Commercial work declined for the first time in ten months, making this

category the worst performer. Given the importance of Brexit, the ongoing

uncertainty was suggested by anecdotal evidence as weighing on client demand. 

     Furthermore business confidence remains concerning, slipping to a

three-month low, with survey respondents reporting that "Delays to client

decision-making on new projects in response to Brexit uncertainty was cited as a

key source of anxiety at the start of 2019". 

     "UK construction growth shifted down a gear at the start of 2019, with

weaker conditions signalled across all three main categories of activity," said

Tim Moore, Economics Associate Director at IHS Markit.   

     The aforementioned "wait-and-see" approach by clients meant that new

business growth eased to an eight-month low in January. Construction firms noted

both softer demand conditions and longer sales conversion times. 

     --FEEDTHROUGH TO HIRING

     Weak demand for orders manifested itself into a drop in employment numbers.

"Staff recruitment slowed to a crawl in January, with construction firms

reporting the softest rate of job creation since July 2016," said Moore. 

     --PRICE INFLATION MODERATING

     Slower growth of input buying eased supply chain pressures in January.

Vendor performances were the joint-weakest since September 2016. There was also

the smallest reduction in sub-contractor availability for two-and-a-half years.

Input price inflation continued to cool in January, with average cost burdens at

their slowest pace since June 2016.  

     There was evidence that construction firms remain positive about the

outlook for business activity in 2019. Around 41% of survey respondents

anticipated a rise in output, more than usurping the 16% that forecasted a fall.

Nonetheless, the index did signal a moderation in January when compared to

December. Driving optimism was large-scale civil engineering projects. 

     --CHALLENGES AT THE FOREFRONT OF THE CONSTRUCTION SECTOR 

     "The sector suffered a sharp drop in output growth in January, and the

softest rise in purchasing volumes since September 2017, as Brexit continues to

hamper progress and dampen client confidence," said Duncan Brock, Group Director

at the Chartered Institute of Procurement & Supply. 

     Brock also noted that the sluggish employment reading and business

optimism. "Employment rose at the slowest rate since July 2016 and with the

optimism also in short supply, the sector only needs a small nudge to tip it

closer to recession," he added. 

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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