MNI DATA: UK Construction PMI Declines For First Time In 11M

--CIPS/IHS Markit UK Construction PMI 49.5 in Feb vs 50.6 in Jan

By Jai Lakhani

     LONDON (MNI) - The UK CIPS/IHS Markit construction sector PMI dropped 1.1

points to 49.5 in February, the latest survey published Monday showed. 

     The disappointing reading marks the first time the sector has contracted

since the snow-hit March 2018. It is also significantly below the industry

implied 52.5 change/no-change mark and further evidence that the sector has

slowed into 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. 

     Residential activity was the best performing area of construction in

February, with growth noted for the thirteenth month running. Whilst an

impressive feat, expansion was modest and more than offset by commercial and

civil engineering activity declining. 

     It is impressive however that the sector still expanded despite reports of

low transaction volumes and a drop in confidence across the housing market. 

     The anecdotal evidence showed firms slow to make decisions given the

continuation of Brexit uncertainty. This was also a theme which was felt amongst

clients, impacting demand. 

     New work fell to its weakest since May 2018, signalling only a marginal

overall rise. Dragging commercial projects down was a lack of invitations to

tender. 

     --EMPLOYMENT SLOWS

     A consequence of the aforementioned factors was that employment growth

softened from the final quarter of 2018. Companies which did take on new workers

did so with trainees taking on extra work to replace skill shortages. However,

some firms noted that the business outlook prevented them replacing voluntary

leavers. 

     Input buying fell for the first time since September 2017. However,

caveating this was suppliers' delivery times lengthening to the greatest extent

since August. Some evidence suggested the reason for this was stockpiling by UK

manufacturers had resulted in shortages of transport availability and led to

longer wait-times for construction products and materials. 

     In summary, the fall in input buying was enough to lower input cost

inflation to its second lowest level since June 2016 but it did still edge up

since January. 

     "The UK construction sector moved into decline during February as Brexit

anxiety intensified and clients opted to delay decision-making on building

projects," said Tim Moore, Economics Associate Director at IHS Markit.   

     --BREXIT UNCERTAINTY

     "The recent fears over the Brexit-related impacts on the sector were

realised this month, as barring the weather-related blip in March last year,

construction put in its worst performance since September 2017, with the PMI

contracting to just below the no-change mark," said Duncan Brock, Group Director

at the Chartered Institute of Procurement & Supply. 

     Brock also noted that the sluggish employment reading and business

optimism. "In short, the foundations of the construction sector are crumbling

under the weight of Brexit and businesses are switching to survival mode until

the way forward is cleared," 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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