Construction activity fell again at year-end but by less than in November and also more slowly than expected. At 46.8, the sector PMI was 1.3 points firmer than in mid-quarter and while still well short of the 50-expansion threshold, some 0.8 points stronger than the market consensus. In fact, this was its highest reading in four months.

In line with recent months, weakness was broad-based but dominated by the housing market where the subsector PMI (41.1) remained deep in recession territory. Elsewhere, commercial building (47.61) again held relatively firm while civil engineering (47.0) contracted at a notably less rapid pace than previously.

In a similar vein, aggregate new orders fell by less than in November and this prompted a return to positive growth for sector payrolls, albeit only marginal. Purchasing activity dropped by the least in four months and input costs decreased for a third straight month on the back of very competitive market conditions. Business confidence in the year ahead was modestly optimistic but contingent upon interest rates falling during the year.

Despite the surprisingly firm headline index, December's report still points to a poor fourth quarter for the construction industry which very probably subtracted from the period's GDP growth. That said, the data were strong enough to lift the both the UK RPI and RPI-P to 19. Overall economic activity might be weak but it is still running slightly ahead of what the forecasters predicted.

The headline index is expected to edge up from November's 45.5 to 46.0.

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.