UK builders grew less optimistic about the outlook in September, putting off decisions on major projects even as the downturn in the sector showed signs of easing, a key survey showed.
S&P Global’s purchasing managers’ index rose to an eight-month high of 46.1, up from 44.3 in August. It was better than the 44.9 expected by economists but the sector remained below the 50 threshold separating growing and falling output.
While the housebuilding sub-index improved, it remained deep in contraction territory and extended a slump that has dashed the Labour government’s hopes of overseeing a property construction boom.
Rising interest rates, inflation and weak orders dampened growth expectations in the sector with firms delaying decisions amid uncertainty over the conflict in the Middle East. The future activity index dropped to its lowest since May.
“Total new orders were relatively subdued in September as construction firms reported longer sales conversion cycles and clients deferred decision-making on major projects,” said Tim Moore, economics director at S&P Global Market Intelligence. “This was attributed to subdued demand and geopolitical tensions, while some also noted pressure from sharply rising input costs.”
The construction industry was already in a protracted downturn when the US-Iran war broke out and caused inflationary pressures to surge again. It has been the weakest part of the UK private sector surveyed in the PMIs with services and manufacturing growth holding up against the conflict’s fallout so far.
Costs for builders grew at the weakest pace in seven months just before the war started. However, Moore warned the trend of easing price pressures “seems unlikely to endure given recently escalating fuel prices and transportation costs.”