Construction activity contracted surprisingly sharply in September. At 45.0, the sector PMI was nearly 5 points short of the market consensus, down almost 6 points versus its August print and well below the 50-expansion threshold. It was also indicative of the steepest decline since May 2020.

Weakness was broad-based but once again led by the housing market where the subsector PMI (38.1) extended what has become a fairly steep downward trend. Elsewhere, commercial building (47.7 lost relatively little ground but civil engineering (45.7) had a very poor month.

Ominously too, aggregate new orders fell for the third time in the last four months and by the most in more than three years. Employment still rose, but only modestly and by the least since June. Suppliers' delivery times shortened for a seventh straight month but input costs were essentially unchanged. Business confidence in the year ahead remained positive but deteriorated to its lowest level since last December.

The September results warn that construction, which had been holding up surprisingly well, is now suffering more from the effects of weak demand and high borrowing costs. The fourth quarter is unlikely to look any better. Even so, today's update puts the UK RPI and RPI-P at 31 and 28 respectively, indicating that overall economic activity is running quite well ahead of market expectations.

The sector PMI is expected to slip from August's 50.8 to 49.9.

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.