Last edited 07 Sep 2020

August 2020 construction PMI survey results

Contents

[edit] Introduction

Construction sector growth slowed according to the IHS Markit/CIPS construction purchasing managers’ index (PMI) for August 2020. The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index registered 54.6 in August 2020, down from 58.1 in July 2020. Figures above 50.0 indicate growth of total construction output.

While higher levels of activity have been recorded in each of the past three months, the latest expansion was the weakest over this period.

IHSAug2020Chart1.jpg


These statistics suggest a setback for the recovery in UK construction output, as improvements continue to slow in relation to the near five-year high in July 2020. Some survey respondents indicate that a lack of new work to replace completed contracts has halted growth.

All three broad categories of construction - housing, commercial and civil engineering - registered declines in comparison to July 2020.

IHSAug2020Chart2.jpg

Source: IHS Markit/CIPS.


House building has registered the strongest rebound since work stoppages were triggered in March 2020. This trend continued in August 2020, with the seasonally adjusted Housing Activity Index at 60.7. The figure for commercial work was 52.5; civil engineering activity was 46.6 in August 2020.

[edit] Orders hold back output growth

Total new business volumes increased for the third month running during August 2020, but the rate of expansion slowed from July 2020. Construction companies noted that economic uncertainty, especially from clients, has made it more challenging to secure new work. However, survey responses were varied, mirroring the multi-speed recovery experienced across different sectors.

Supply chain disruption persisted across the sector, which led to a sharp downturn in vendor performance. Stock shortages and an imbalance of supply and demand contributed to higher purchasing costs. The overall rate of input price inflation was the highest since April 2019.

[edit] Business expectations boosted by potential infrastructure work

Despite reporting subdued new business intakes since the start of the pandemic, construction companies reported an improvement in their business expectations for 2021. More than twice as many survey respondents (43%) expect to see a rise in construction output over the next 12 months as those that anticipate a fall (19%).

This optimism was linked to anticipated involvement in major infrastructure and public sector construction projects. However, this did not stop a decrease in staffing numbers. The rate of job losses slowed slightly compared to July 2020 but overall continued at the fastest pace over the past decade.

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