The IHS Markit/CIPS UK construction PMI® slipped further into contraction, reading 45.0 in August down from 45.3 in July. This is the fourth consecutive month of contraction readings. New orders fell at the fastest pace for more than ten years.
All three categories of construction work decreased in August, led by commercial building. Brexit related uncertainty is reported as having encouraged risk aversion and tighter budgeting among clients. Civil engineering activity also dropped at a relatively sharp pace. House building fell only slightly and the rate of decline was the least marked since June.
New orders for construction have dropped each month since April. Latest data indicates that the rate of contraction is the fastest since March 2009.
Employment was ‘relatively resilient’ during August, with only a marginal drop in staff. Some companies noted tight labour market conditions were encouraging retention of skilled staff, with reduction in employment levels primarily through non-replacement of leavers.
Input buying decreased for the fifth month running, taking some pressure of supply chains and moderating input inflation.
Business optimism was the weakest since end 2008. CIPS commented “The reality is, if a revival of confidence and a flood
of new orders return to the construction sector in the coming weeks, much like a large tanker turning in a dock, there is little room for the sector to improve in the last quarter of the year. It’s likely September’s data will be even more discouraging.”