Construction activity was surprisingly soft in June. At 48.9, the sector PMI was well short of the market consensus and below the 50-expansion threshold for the first time in five months.

Unusually, civil engineering (53.1) was the best performing category, just ahead of commercial building (53.0) which also had a decent month. However, residential construction (39.6) was very weak, contracting for a seventh straight month and, outside of the Covid lockdown period, at the fastest rate since April 2009.

Aggregate new orders fell for only the second time this year and input buying was down for the first time in five months. However, suppliers' delivery times shortened for the fourth month running and by the most in around 14 years. Improved input availability due to rising stocks among vendors and softer underlying demand were key here. Input costs posted their first outright decline since January 2010 but business confidence in the year ahead still worsened for a third successive month.

In line with recent months, the June update shows construction holding up relatively well apart from housing. Still, with mortgage costs rising rapidly, residential building can be expected to remain a major drag for some months to come. Today's data put the UK ECDI at 11 and the ECDI-P at minus 4. The gap shows that limited overall outperformance is only due to unexpectedly firm prices.

Construction activity is expected to slow modestly with the sector PMI seen at 51.0 in June.

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.