Construction activity continued to contract at the start of the year but by less than in December and (again) more slowly than expected. At 48.8, the sector PMI was a full 2 points above its December print and 1.5 points stronger than the market consensus. It was also the highest outturn since last August.

In line with recent months, all three subsectors posted fresh losses but only housing (44.2) was truly weak. Both civil engineering (49.8) and commercial building (49.1) essentially stagnated.

Aggregate new orders declined for a sixth straight month but the fall was only marginal and the smallest over the sequence. Headcount was similarly trimmed just fractionally while suppliers' lead times shortened further. However, input costs across the sector increased sharply and by the most since last May, in part reflecting higher shipping costs due to disruptions in the Red Sea. Even so, business confidence for the coming 12 months still improved to a 2-year high.

Overall, the January data hint at better times ahead for UK construction. Nonetheless, with demand still falling and input costs on the rise again, little can be taken for granted and the first quarter is likely to be challenging. The January survey puts the UK RPI at 4 and the RPI-P at minus 4. Both measures show economic activity in general performing much as expected.

The sector PMI is expected to rise from 46.8 in December to 47.3.

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.