Growth of construction activity slowed surprisingly sharply in March. At 50.7, the sector PMI was nearly 3 points short of its February reading and close enough to the 50-expansion threshold to signal little more than stagnation. However, at least this was the second successive month of positive growth.

Civil engineering (52.0) overtook commercial work (51.1) as the best performing category but housing (44.2) fell at an accelerated pace and by the most since May 2020.

Still, aggregate new orders rose again and at the fastest rate since last July. In turn, this prompted a further expansion in headcount which increased at the strongest pace since October 2022 despite shortages of labour. Purchasing activity was broadly unchanged but business sentiment improved further to hit its highest level in more than a year.

However, input costs continued to rise sharply on the back of elevated energy costs and rising staff wages. That said, base effects ensured that cost inflation was still the second-slowest since November 2020

Overall, the March results are disappointing but there are bright spots in today's report which, housing aside, suggest that the construction sector is holding up quite well. Today's update puts the ECDI at 1 and the ECDI-P at 2. Both measures show that overall economic activity is performing much as the forecasters predicted.

The sector PMI is seen at 53.5, down from 54.6 in February.

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.