Construction growth eases to three-month low in December
Construction growth continues but it slowed to a three month low in December according to the latest IHS Markit/CIPS UK Construction PMI Total Activity Index. The weakness centred on commercial and civil engineering segments as house building regained its place as the fastest- growing category. Supplier delays are now the least widespread since November 2020.
December PMI data pointed to another solid increase in business activity across the UK construction sector, but the rate of expansion slipped to its lowest since September.
On a more positive note, the number of construction firms reporting supplier delays dropped from 47% in November to 34% in December. Meanwhile, around 5% of the survey panel reported shorter lead times among vendors (up from 4%). The resulting index signalled the least marked downturn in supplier performance since November 2020.
Fewer supply shortages contributed to the slowest rate of input price inflation for nine months.
The headline seasonally adjusted Index posted 54.3 in December, to remain above the crucial 50.0 no-change threshold. However, the latest reading was down from 55.5 in November and signalled the weakest rate of expansion for three months.
Tim Moore, Director at IHS Markit, said: “The worst phase of supplier delays seems to have passed as the availability of construction products and materials continued to turn a corner in December. While suppliers to the construction sector have caught up on backlogged work and boosted capacity, there were still widespread reports citing unresolved transportation issues and driver shortages.
“Input cost inflation moved down another notch in December, helped by the alleviation of some supply chain pressures. The latest rise in purchasing prices was far slower than the 24-year peak seen last June.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “Though the overall index moved down slightly in December there was light at the end of the tunnel for builders in terms of the strongest order numbers since August, reduced pressure on business costs and some improved delivery times for essential materials.
“Residential building has powered on every month since June 2020 and was the best performing category in the last month of 2021. Commercial building struggled to gain a stronger footing in a weakened UK economy and civil engineering activity fell back into contraction.”
Joe Sullivan, Partner at MHA, says the sector faces challenges from labour and supply shortages, as well as the spread of the Covid-19 Omicron variant, but overall confidence is high and work continues to flow in: “The availability of labour is now the number one issue within the UK construction sector, with wages continuing to rise. Staff mobility is high as people look for the best pay packets, causing further disruption. In addition, the spread of the Covid-19 Omicron variant has inhibited progress on building sites, dampening output and making planning evenmore difficult.
“However, despite these challenges, confidence in the construction sector is still quite strong. There are signs thatthe supply chain crisis is easing. Firms have noticed small improvements in the availability of supplies and the rate of material price increases may have peaked. Although certain decisions may be deferred until the Omicron variant abates, all indications are that plenty of work is available as we begin 2022.”
