UK construction PMI rises sharply in January- IHS Markit/CIPS

January data from IHS Markit/CIPS pointed to a much slower decline in UK construction output than that seen at the end of 2019. New business volumes were also close to stabilisation, which contrasted with the sharp falls seen in the final quarter of last year. Survey respondents widely commented on a boost to client demand from receding political uncertainty. Looking ahead, construction companies are now the most optimistic about their growth prospects since April 2018. A number of firms noted that clients' willingness to spend had picked up after the general election, which should translate into rising workloads over the course of 2020.

The headline seasonally adjusted UK Construction Total Activity Index rebounded from 44.4 in December to 48.4 in January. Economists had expected an increase to 46.6. The latest reading was still below the 50.0 no-change threshold, but signalled the slowest fall in overall construction output for eight months.

House building was the best performing broad area of construction activity, with output falling only slightly in January. Mirroring the overall construction output trend, residential work fell at the slowest pace since May 2019. Commercial activity decreased for the thirteenth consecutive month in January, but the rate of contraction was much weaker than in December and the softest since the start of 2019. Meanwhile, civil engineering was the worst performing category of output in January, with construction firms often citing a lack of tender opportunities to help replace completed infrastructure contracts.