This is the headline finding of the latest monthly survey of construction purchasing managers.
The only good news is that the rate of contraction eased.
The seasonally-adjusted Construction Purchasing Managers’ Index, which measures overall output in the sector, posted 48.7 in January, unmoved from December’s six-month low.
Anything below 50 puts the industry in negative growth, and this is the third month running that it has been below 50.
Lower construction output in January reflected falling volumes of housing and civil engineering activity. While the decline in civil engineering was the first since August 2012, the latest drop in residential construction was the slowest for three months. There were some reports that snowfall had contributed to reduced output volumes, but the majority of respondents cited weak underlying client demand and a lack of new projects.
Commercial activity was the only sub-sector to buck the wider downward trend in output during January. Latest data pointed to unchanged volumes of commercial activity, which ended a five-month period of contraction.
Decreased new order volumes and lower output contributed to another reduction in input buying in January. Latest data also indicated a sharp deterioration in supplier performance, with vendor delivery times lengthening to the greatest degree in three months. Construction firms attributed longer supplier lead times to a combination of low stocks at vendors and disruptions caused by snowfall at the start of 2013. Average cost burdens increased again in January, but the rate of inflation was the slowest for six months and well below its long-run trend.
However, survey respondents voiced improved confidence for the next 12 months, after a near-four year low in sentiment in November. Although the degree of optimism was still weak by the survey’s historical standards, the latest reading was the highest since last July. This in turn supported employment levels in January, with higher construction workforce numbers reported for the first time in four months.
The survey is carried out each month by Markit on behalf of the Chartered Institute of Purchasing & Supply (CIPS).
Markit senior economist Tim Moore said: “January’s survey results are yet another indicator of the severe underlying fragility across the UK construction sector, with output failing to rise in any of the three monitored sub-sectors for the first time since last summer.
“Snowfall at the start of the year may have disrupted output to some degree, but unfavourable weather outside is clearly far down the long list of difficulties afflicting construction companies at present. Weakness was again most prominent within the house building sub-sector during January, while civil engineering swung back into contraction after a four-month period of growth.”
“Despite the ongoing downturn in output, there was some let up in the pace of new order decline, as well as a resilient employment trend in January. Looking ahead, construction firms reported improved optimism about the business outlook, although much of this appeared to rest on hopes that the chorus of calls for greater public sector investment spending starts to come to fruition.”
CIPS chief executive David Noble said: “Snow compounded difficult economic conditions to ensure the construction sector’s winter blues continued into January. Yet against expectations, businesses have a spring in their step looking ahead to 2013. This new-found confidence has been buoyed by news of public investment, but it could be found wanting, if the Government’s recent rhetoric on major infrastructure projects fails to bear fruit.
“In a reversal of fortunes, the commercial sector stabilised after a tough second half of 2012, while civil engineering has experienced its first decline in 5 months. The housing sector continues to contract albeit at a less severe pace than we have become used to in the last year.
“Levels of new business had been falling at a worrying pace and this decline appears to have stabilised to some extent; perhaps this is one of the reasons employment has grown for the first time since September. Like much of the sector however, staff numbers remain below the long term average and we expect this trend to continue across the board.”
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