(Bloomberg) -- UK construction firms suffered a third straight month of declining output as the housing market slump forced builders to cut back on projects.
S&P Global’s construction purchasing managers’ index was much weaker than expected, edging down to 45.5 last month from 45.6 in October. It marked the second-lowest score since the first Covid lockdown. Economists had forecast a slight rebound to a reading of 46.7, with figures below 50 signaling a contraction.
The survey released Wednesday added to evidence of a deepening downturn gripping the sector after a surge in interest rates made more projects unprofitable. Construction companies cut employment for the first time in 10 months, and input prices declined at their fastest pace since 2009.
The weakness in construction marks a contrast to resilience in the wider economy to the headwinds of high interest rates and a cost-of-living crisis. The composite PMI returned to growth territory in November and was revised upwards in the second estimate released on Tuesday.
For construction, the latest bout of weakness was driven by the downturn in housebuilding. High mortgage rates weighed on prices and transactions, with concerns that activity will remain weak for the foreseeable future.
“ A slump in house building has cast a long shadow over the UK construction sector, and there were signs of weakness spreading to civil engineering and commercial work during November,” said Tim Moore, economics director at S&P Global Market Intelligence.
“Elevated mortgage costs and unfavorable market conditions were widely cited as leading to cutbacks on house building projects,” he said.
While supply constraints on the sector showed more signs of easing, S&P said that new orders declined for a fourth month running. Business expectations for the year ahead picked up from October’s low, though remained weak.
--With assistance from Joel Rinneby.
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