Construction activity contracted again in October and by rather more than expected. At 45.6, the sector PMI was up 0.6 points versus its final September mark but 0.4 points shy of the market consensus and still well short of the 50-expansion threshold.

Weakness was again broad-based but dominated by the housing market where the subsector PMI (38.5) was deep in recession territory. Elsewhere, commercial building (49.5) held relatively firm but civil engineering (43.7) also contracted sharply and at a faster pace than in September.

Aggregate new orders fell for the fourth time in the last five months and by the most in more than three years while employment growth was positive but the weakest since June. Soft demand was reflected in another strong rise in the availability of sub-contractors where rates charged dropped for the first time since July 2020. Indeed, input costs decreased at the steepest rate since August 2009. Business confidence in the year ahead remained positive but still deteriorated to its lowest level so far in 2023.

The October results point to a poor quarter for the construction industry in general and for house building in particular. Today's update also reduces the UK RPI and RPI-P to minus 18 and minus 29 respectively. Both measures show overall economic activity lagging market expectations.

The sector PMI is expected to edge up to 46.0 from 45.0 in September.

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.