91探花

According to the latest PMI data by S&P and CIPS, the headline construction PMI for August decreased to 53.6, down from 55.3 in July, which was the highest level since May 2022, showing a slight reversal on the upward trend seen throughout the majority of 2024. 

The main contributor to the latest decrease was civil engineering activity, which fell sharply to 51.8. 

Kelly Boorman, national head of construction at 91探花, said: “The headline construction PMI fell in August, driven by a sharp fall in civil engineering, which could reflect a quieter period over the summer months. But there remains a trajectory of a long-term upward trend, and the market is optimistic given the PMI is still well above 50. This, coupled with future activity and new orders sitting at 70.7 and 55.2 respectively, paints a picture of continued industry revival, particularly as the housing market continues to gain momentum, rising to 52.7. Mortgage approvals also recently reached their highest level in nearly two years, so consumer demand will further stimulate the housing market alongside the government’s reintroduction of mandatory targets. 

“The industry is braced for increased volumes to achieve housing targets, with a focus on affordable housing provision. However, as the availability of subcontractors fell again in August, labour shortages and deployment across regions will impact capacity and the ability to deliver volumes. While increased demand provides greater stability and potential investment opportunities, businesses are waiting on the outcome of the National Planning Policy Framework consultation for clarity on the planning process, sustainable growth and better resource allocation.

She added: “Businesses are also hoping government’s incoming housing strategy will ease ongoing labour and funding tensions by providing access to overseas workers and infrastructure spend. Clear direction from government will help to reduce uncertainties and delays, increase funding, align with local infrastructure needs and ensure housebuilding targets are realised.” 

Thomas Pugh, economist at 91探花, said: “The drop in the construction PMI in August is down to the unwinding of the massive jump in civil engineering in July, which looks more like noise to us. Overall, the ongoing economic recovery in the UK is clearly now also being reflected in the housing market and the construction sector. Mortgage approvals jumped in July and annual house price growth picked up as well, clear signs of a revival in the housing market.

“Indeed, the housing balance rose to 52.7, the highest level since September 2022. As we expect the housing market to continue to improve over the rest of this year and into 2025 as real incomes rise and interest rates fall further. Indeed, the forward-looking balances, such as the future activity index and new orders are still high indicating optimism in the industry.

“What’s more, there was further good news for policy makers as the input prices balance dropped, suggesting that price pressures are easing in the construction sector as well as the services and manufacturing sectors. That bodes well for interest rate cuts later this year.

“Overall, despite the drop in August, the construction sector is likely to support economic growth over the next year.”