The outlook for UK construction output is not looking good as output has continued to ease in December.
Less work on commercial projects and stagnating civil engineering offset more residential building, according to IHS Markit. The data and analysis specialist pencilled in 52.2 in the Purchasing Managers’ Index in December.
While construction output is continuing to grow as it is over 50, the latest reading is a sharp fall from 53.1 in November.
This should not come as a surprise to Shares readers. We reported that construction output suffered its first consecutive quarter-on-quarter decline in over five years last month.
Even more concerning is that construction firms are less optimistic about the outlook this year as concerns about Brexit cloud the UK's economic future.
Markit says the amount of companies expecting higher output levels was among the weakest recorded since mid-2018.
Despite the downbeat forecast, shares in construction services firms are resilient. Balfour Beatty (BBY) is up 0.5% to 295.8p and Kier (KIE) dipped 0.4% to £10.86.
Galliford Try (GFRD) is also resilient as the shares retreated a mere 0.1% to £12.87.
Investors may be encouraged by positive signals in December for the near-term business outlook. New order growth hit a seven-month high and job creation was at its strongest since June, according to Markit.
Markit associate director Tim Moore says: ‘The UK construction sector achieved a moderate expansion of business activity at the end of 2017, although the recovery remained uneven and slowed since November.’
