The S&P Global/CIPS UK Construction Purchasing Managers Index (PMI), on which a score below 50 indicates a contraction, dropped to 48.8 in the December 2022 reading. This was the first contraction in construction sector output since August 2022 and was below the market expectations of 49.6.
Although the rate of inflation remains high, it is the weakest for two years. Our expectation is that inflation will continue to fall as we go through 2023, which will be welcome news to both developers and contractors alike.
Housing activity declined in the period for the first time since July 2022. This supports the cautionary messages issued by the major housebuilders in the latest reporting updates to the City. The majority of housebuilders are reporting significantly reduced plot reservation rates and a slowdown in new site acquisition, with some housebuilders looking to dispose of sites that are not core to their market positioning.