Output decline slows but PMI index stays in red for 18th successive month

The rate of decline in output slowed last month, according to the bellwether PMI index.

S&P Global’s purchasing managers’ index, which tracks changes in activity, scored 38.4 in June, up slightly from May’s six year low of 38.2.

But the number is still well below the 50 no change mark and means the figure has stayed in negative territory for 18 consecutive months.

Commercial work was the best-performing category with a score of 41.5 but housebuilding, with a score of 35.9, fell at its sharpest rate this year so far. And civil engineering fell at its fastest rate since April 2020, when the country was in the grip of the covid pandemic, with a score of just 22.1.

The report said: “June data signalled another sharp fall in total new work, although the speed of the downturn was the slowest since March.

“Anecdotal evidence cited factors such as fewer new build house sales, weak business investment spending, and intense competition for new orders. Some firms commented on improved opportunities to tender for defence and energy sector projects.”

Tim Moore, economics director at S&P Global Market Intelligence, said: “Lower levels of construction activity were attributed to a mixture of subdued housing market conditions, higher borrowing costs, elevated business uncertainty and delayed project starts.

“Anecdotal evidence cited factors such as fewer new build house sales, weak business investment spending, and intense competition for new orders. Some firms commented on improved opportunities to tender for defence and energy sector projects.”

Aecom’s head of cost management Brian Smith welcomed the slowdown in the rate of decline but warned: “Projects can’t be allowed to drift in the summer, with stakeholders hesitating on key decisions – and this extends to both public and private sectors. The sector needs more momentum and only new starts can provide it.”