UK construction output rises only marginally in January

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index dropped to 50.6 in January, from 52.8 in December. The index has posted above the 50.0 no-change mark in each month since the snow related decline seen in March 2018, but the latest expansion was the weakest seen over this ten month period of growth.

According to the report, all three categories of construction output - residential work, civil engineering activity, сommercial work - recorded weaker trends than those reported in December.New business growth eased to an eight-month low in January. Construction firms widely commented on softer demand conditions and longer sales conversion times, reflecting a wait-and-see approach to spending by clients.

Meanwhile, slower growth of input buying helped to reduce pressure on construction supply chains in January. The latest deterioration in vendor performance was the joint-weakest since September 2016. Input price inflation continued to moderate in January, with average cost burdens rising at the slowest pace since June 2016. Where an increase in purchasing costs was reported, this was generally linked to rising prices for imported construction products and materials.

Construction firms remain positive about the outlook for business activity in 2019. Around 41% of the survey panel anticipate a rise in output, while only 16% forecast a fall. However, the resulting index signalled a moderation in optimism since December.