Construction sector downturn eases in December

There was yet another fall in UK construction activity in December 2023, although the rate of decline eased to the slowest since the current phase of decline began last September, reveals the S&P Global UK Construction PMI.

At 46.8 in December, the seasonally adjusted index tracking changes in total industry activity was below the neutral 50.0 mark for the fourth month running.

However, the index was up from 45.5 in November and the highest for four months.

Commercial construction meanwhile declined only modestly (index at 47.6), but the speed of the downturn accelerated to its fastest since January 2021.

Improving supply conditions continued in December, with delivery times for construction items shortening for the tenth month in a row.

Price discounting among suppliers contributed to a moderate fall in average cost burdens across the construction sector at the end of 2023.

Tim Moore, economics director at S&P Global Market Intelligence, said: "Construction companies experienced another fall in business activity at the end of 2023 as weak order books meant a lack of new work to replace completed projects.

“Housebuilding was the worst-performing area of construction activity, but even in this segment there were signs that the downturn has started to ease.

"Elevated borrowing costs and a subsequent slump in market confidence were the main factors leading to falling sales volumes across the construction sector in the second half of 2023.

“Survey respondents also continued to cite worries about the broader UK economic outlook, especially in relation to prospects for commercial construction.

"However, expectations of falling interest rates during the months ahead appear to have supported confidence levels among construction companies.

“December data indicated that 41% of construction firms predict a rise in business activity over the course of 2024, while only 17% forecast a decline.

“This contrasted with negative sentiment overall at the same time a year earlier."

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