Data released by S&P Global / CIPS showed that activity in the construction sector rose again in February, recording the third monthly increase in a row, and reaching the highest level since August 2023. Meanwhile, new work rises for the first time since July 2023, and business optimism remains most upbeat since January 2022. Overall, the forward-looking survey indicators provide encouragement that business conditions in the construction sector could improve in the coming months.
UK construction PMI rose to 49.7 points from 48.8 points in January. Economists had expected an increase to 49.0 points. However, the index remains below 50 points, indicating a reduction in activity in the sector, for the sixth month in a row.
The report showed that among the three main categories of construction activity, house building saw the biggest turnaround since January, with the respectable index at 49.8, up from 44.2 and the highest level since November 2022. Survey respondents suggested that improving market conditions had gradually contributed to a stabilization of residential construction work. In contrast, the commercial segment saw a more subdued performance than in January, with construction companies typically citing hesitancy among clients and constrained budget setting. Meanwhile, new orders in the construction sector rose for the first time in seven months, albeit slightly. This appeared to reflect a turnaround in tender opportunities and greater client confidence, especially in the house building segment. Employment in the construction sector declined again in February, with the pace of contraction being the sharpest since November 2020. As for the prospects, 51% of respondents expect business activity to grow in the coming year, while only 6% predict its decline. This indicates the strongest degree of business optimism in just over two years. Construction companies mainly noted the start of new projects and positive signals for consumer demand, partly related to the expected reduction in interest rates.