Economic Buzz: UK construction sector continues to shrink in August
The construction Purchasing Managers' Index posted 45.5 in August, up from 44.3 in July. However, the score remained well below the 50.0 mark indicating sharp fall in construction output.
The survey showed that a slower reduction in commercial building helped to offset steeper declines in residential and civil engineering activity.
Among three segments, civil engineering was the weakest performer, with business activity decreasing at the fastest pace since October 2020. The fall reflects lack of new projects to replace completed work.
Total new orders across the construction sector dropped for the eighth month in a row, although the rate of decline eased to the least marked since January. Respondents cited challenging market conditions, intense price competition and headwinds from sluggish UK economic activity as reasons for the fall in orders.
Due to lower volumes of output and incoming new work, companies reduced staffing. The latest reduction in employment was the fastest since May.
Further, a lack of forthcoming project starts led to a solid reduction in purchasing activity and the pace of decline in input buying was the sharpest for three months.
Subdued demand for construction products and materials led to shorter wait times for supplier deliveries in August.
Regarding price pressures, the survey showed that purchasing prices increased at the slowest pace since October 2024. The increase in subcontractor charges was the slowest for six months.
Finally, there was a renewed weakness in business optimism across the construction sector. The level of confidence was the lowest since December 2022. Construction companies reported subdued market conditions, elevated business uncertainty and risk aversion among clients.
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