Housing sector shows steepest decline in 20 months according to CIPS data for December

Construction work fell for the first time in nine months in December, according to the latest PMI figures from the Chartered Institute of Purchasing and Supply (CIPS).

The index fell from 51.8 in November to 49.1 last month - a figure below 50.0 indicates a contraction.

Many constructors attributed the slowdown to poor weather conditions as new orders continued to show growth. But employment also fell sharply and confidence regarding future business prospects remained historically weak.

Commercial work continued to outperform the rest of the industry and was the only sector to post a rise in activity during December.

But activity in house building, civil engineering and residential construction all decreased. Housing showed its steepest decline for 20 months.

The CIPS said the fall in employment could reflect the historically low rate of new order growth, which remains well below the long-run series average.

A disappointing end to the year for the UK Construction sector

David Noble, CIPS

Sarah Ledger, economist at Markit and author of the UK Construction PMI, said: “A modest rise in new business suggested that particularly poor weather had acted to reduce activity. Nonetheless, growth has been subdued in recent months, largely due to contractions in residential construction, signalling that business conditions in the sector were not conducive to a large overall expansion in activity.”

David Noble, chief executive officer at CIPS, said: “A disappointing end to the year for the UK Construction sector, as the PMI drops into contraction territory again.

“The overall picture for 2011 is also likely to stay subdued. Yet, confidence about future activity rose in December based on a rise in new orders, despite poor weather, and hopes for a general economic improvement.

“However, this was at a slower pace than the previous month, and it is telling that purchasing managers saw the gradual easing of competition as one of the factors contributing to this.