U.K. construction business activity falls in February, IHS Markit PMI drops to 49.5

Construction firms in the U.K. indicated that business activity levels dropped in February, which ended a 10-month period of sustained growth. The headline seasonally adjusted IHS Markit/CIPS U.K. Construction Total Activity Index dropped to 49.5 in the month from January 50.6. Apart from the brief weather-related fall in the output, the latest reading was the lowest since September 2017.

Residential work was the best performing area of construction activity in February, with growth seen for the 13th consecutive month. Nevertheless, the pace of growth was only modest and thus could not counter the falls seen for commercial and civil engineering activity. In both cases, the rate of contraction was the steepest since March 2018.

Anecdotal evidence from survey respondents implied that Brexit uncertainty had decelerated decision-making on commercial projects and led to soft client demand so far in 2019. There were also reports that low transaction volumes and a general fall in sentiment throughout the housing market had acted as a brake on residential building.

Data for February hinted at just a marginal overall rise in new work received by construction companies, with the latest index reading the softest since May 2018. Political uncertainty was broadly cited as a factor adding to a lack of invitations to tender, especially on commercial projects.

Weak order books and a renewed fall in construction output signified that employment growth continued to be much weaker than seen in the fourth quarter of 2018. Among those firms recording a rise in staffing figures, there were some reports that extra trainees had been taken on to help ease skill shortages. Nevertheless, other companies commented that worries about the business outlook had led to the non-replacement of voluntary leavers.

The index gauging business expectations for the year ahead continued to be inside positive territory, but the degree of confidence dropped to a four-month low and was below the long-run survey average. Construction companies noted that delays to client decision-making had decelerated progress of new project starts, which might create gaps in their future workloads.

Input buying dropped for the first time since September 2017, reflecting weaker demand. Nevertheless, suppliers’ delivery times lengthened to the greatest degree since August 2018.

At 13:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at 37.2159, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 112.12 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex