UK construction falls further than forecast as cost burdens grow

(Alliance News) - The UK construction sector experienced "another challenging month" in April, S&P Global reported on Thursday, as activity levels plummeted.

The headline seasonally adjusted S&P Global UK construction purchasing managers' index posted 39.7 points in April, down from 45.6 points in March and well short of an anticipated 46.0 points reported by Market News International. FXStreet-cited consensus was for a slight rise to 45.7.

Moving further below the 50-point mark separating growth from contraction, April's data is "indicative of a sharp fall in overall business activity," S&P Global said.

Civil engineering activity saw "the steepest decline", to 35.3 points, followed by housebuilding, where the PMI fell to 38.2 points.

"Construction companies often noted that elevated business uncertainty due to the Middle East conflict had led to longer sales conversion times and fewer tender opportunities," S&P Global said.

The survey publisher also noted "a sustained downturn in staffing levels", partly thanks to softening order books, and said jobs were cut at the steepest rate in four months.

Tim Moore, economics director at S&P Global Market Intelligence, commented: "A rapid acceleration of input cost inflation was seen across the UK construction sector...Aside from the post-pandemic surge in input prices from early-2021 to mid-2022, the latest rise in purchasing costs was the steepest in three decades of data collection.

"Around two-thirds of the survey panel reported higher cost burdens in April, which was overwhelmingly linked to fuel surcharges and subsequent rises in raw material prices.

"Adding to supply chain challenges, the latest data also indicated longer wait times for the delivery of construction items due to international shipping delays."

Looking ahead, he continued: "Expectations for construction activity over the next 12 months remained positive overall during April, but confidence levels were the lowest since last November.

"Survey respondents cited a growing list of factors...including fragile investment sentiment and elevated borrowing costs, alongside continued uncertainty about the impact of the Middle East conflict on prices, supply chains and broader economic prospects."

S&P Global compiles the UK construction PMI from questionnaire responses by a panel of around 150 construction companies. Last month's data was collected between April 9 and April 29.

Thursday's construction PMI release follows the services and composite PMI reports on Wednesday.

The headline seasonally adjusted services PMI business activity index rose to 52.7 points in April from 50.5 in March, slightly beating the flash estimate of 52.0 points.

The seasonally adjusted PMI composite output index, which combines the services and manufacturing PMIs, increased to 52.6 points in April from 50.3 in March, showing a "moderate upturn" in output across the manufacturing and service sectors. The flash estimate was, again, for an improvement to 52.0 points.

On Friday last week, S&P Global reported that the UK manufacturing PMI improved to a 47-month high of 53.7 in April from 51.0 in March, beating the flash reading of 53.6.

By Emma Curzon, Alliance News reporter

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