Construction activity fell more rapidly than expected in December. At 48.8, the sector PMI was nearly a full point short of the market consensus and 1.6 points below its November reading. This was the first sub-50 print since August.

Commercial work (50.3) just about achieved positive growth but the minimal gain here was offset by outright falls in both residential building (48.0), which contracted for the first time since July, and civil engineering (46.8), which posted a sixth consecutive loss. Aggregate new orders and purchasing activity declined at the fastest rate in more than two years and employment recorded its first loss since January 2021. Vendor performance was the worst in two-and-a-half years and although input cost inflation declined to a 2-year low, costs still rose sharply on the month. Against this backdrop, business confidence dipped into negative territory for only the sixth time on record.

In sum, December was a poor month for UK construction and probably sets the tone for 2023. Today's report reduces the UK's ECDI to minus 1 and the ECDI-P to minus 14. Overall real economic activity is now starting to fall behind market expectations.

At 49.6, the construction sector PMI is seen slipping into negative growth territory at year-end.

The Construction Purchasing Managers' Index (PMI) provides an estimate of business activity in the UK construction sector for the preceding month based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 170 construction companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on the regional and industry contribution to gross domestic product. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and S&P Global.

The survey is based on techniques successfully developed in the USA over the last 60 years by the National Association of Purchasing Management. It is designed to provide one of the earliest indicators of significant change in the economy. The data collected are not opinion on what might happen in the future, but hard facts on what is actually happening at 'grass roots' level in the economy. As such the information generated on economic trends pre-dates official government statistics by many months.