U.K. construction business activity growth eases in December, construction PMI index falls to 52.8

Construction companies in the U.K. saw a disappointing end to 2018 as business activity growth moderated to a three-month low and new orders grew at a relatively soft rate. The headline seasonally adjusted IHS Markit construction Total Activity Index dropped to 52.8 in December from November’s 53.4. Nevertheless, the latest reading hinted at just a modest pace of growth that was the slowest seen since September.

Anecdotal evidence implied that subdued demand conditions mainly drove the weaker output growth in December. There were also some reports that unusually wet weather had acted as a brake on construction work.

The deceleration in construction growth greatly reflected weaker rises in commercial and housing activity in December. Commercial building was the worst performing category, with activity growing at the slowest pace since last May. Work on civil engineering projects was the most solid performing area of construction activity in December 2018, with growth the most rapid for just over one-and-a-half years.

Total new business volumes rose for the seventh consecutive month; however, the pace of growth eased since November and stayed modest. Several construction companies noted that increased political uncertainty had encouraged delays to spending decisions among clients, in particular to commercial development projects.

A strong rise in employment numbers was seen throughout the construction sector in December. Nevertheless, the pace of job creation eased from November’s near three-year peak. Some companies noted that attempts to reduce costs had led to the non-replacement of voluntary leavers at the end of the year. Meanwhile, sub-contractor usage rose with the pace of growth the strongest since December 2015.

On the other hand, construction supply chains saw some positive signs, with delivery times for materials lengthening to the least marked degree for more than two years. Furthermore, input cost inflation was the second-lowest since July 2016, in spite of ongoing reports that the soft pound had pushed up prices for imported items.

At 12:00 GMT the FxWirePro's Hourly Strength Index of British Pound was slightly bullish at 52.6951, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 37.6591. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex