The December Purchasing Managers Index (PMI) recorded 48.7, down from November’s 49.3. Any score below 50 indicates a decline in work and it has now posted below 50 in four of the past five months.
The data signals a deepening downturn in output across the UK construction sector as well as an accelerated reduction in incoming new work, according to Markit, the organisation that conducts the survey on behalf of the Chartered Institute of Purchasing & Supply (CIPS).
The latest reading indicated the fastest rate of contraction since June 2012, when output was suppressed by unusually bad weather and an extra bank holiday. Although some survey respondents suggested that bad weather in December had resulted in unusually long seasonal shut downs at their units, the majority of companies cited weak underlying demand at the end of 2012.
Housing activity was by far the weakest performer of the three broad construction sub-categories monitored by the survey in December. Residential construction output has now fallen for seven consecutive months and last month saw it fall faster than any time since December 2010. Commercial activity also decreased in December, for the fifth month in succession. Only civil engineering bucked the trend by posting another moderate expansion.
UK construction companies indicated a drop in their volumes of incoming new work for the seventh consecutive month in December. The rate of contraction accelerated markedly over the month and was the fastest since April 2009. Anecdotal evidence widely cited strong competition for a shrinking pool of new invitations to tender amid a background of subdued business and consumer confidence. The lack of new work to replace completed projects contributed to a drop in construction employment levels for the third month running in December.
Markit senior economist Tim Moore said: “December rounded off a miserable year for the UK construction sector, with output declining at the steepest pace for six months and new business intakes falling back at the fastest rate since April 2009. While some firms cited the unusually wet weather as leading to longer than expected seasonal breaks at the end of 2012, weak underlying demand remains prevalent throughout the sector. Survey respondents are also relatively subdued about the 2013 outlook amid reports from their clients that budgets will be under even greater pressure over the year ahead.
“A sharp and accelerated downturn in housing activity was the most striking feature among the overall weakness shown by December’s PMI survey. The pace of contraction in residential building was the strongest since the snow-related drop two years previously, and the extent of the decline made December 2012 one of the worst months for housing activity since the spring of 2009.”
CIPS chief executive David Noble added: “Confidence in the construction sector is now lower than the four year post-recession average, reflecting the poor performance of the sector in the final month of 2012. December witnessed the fastest decline in output in six months and a huge drop in new business, signalling trouble for the year ahead.”
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