The seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) posted at 54.8 in June, down from 56.0 in May.
Across the sector, business activity, new work and employment all expanded at slower rates than in May. Survey respondents commented on signs of renewed risk aversion among clients, reflecting concerns about the economic outlook and heightened political uncertainty.
In addition, construction firms were the least optimistic about their near-term growth prospects since December 2016.
While residential building continued to outperform commercial work and civil engineering in June, the latest rise in housing activity was still the second-fastest since December 2015.
Respondents cited a lack of new work to replace completed projects had weighed on construction growth in June. New order growth eased to its weakest since March, while a number of firms cited delays in decision making among clients, partly linked to heightened economic uncertainty.
Companies also reported the slowest rise in employment numbers for three months in June. Some survey respondents noted that concerns about the business outlook had led to the non-replacement of voluntary leavers. Reflecting this, the index measuring construction firms’ expectations for growth over the next 12 months was the lowest so far in 2017.
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Demand for materials continued to rise at a solid pace in June, with the rate of expansion holding close to May’s 16-month peak. However, a sustained upturn in input buying placed pressure on stocks held by vendors and resulted in longer delivery times for construction materials. The latest deterioration in supplier performance was the second-sharpest since March 2015.
Elsewhere, companies reported another steep increase in their average cost burdens in June. The overall rate of inflation rebounded since May and was the strongest for three months.
Respondents mainly commented on the weaker sterling exchange rate feeding through from manufacturers, with some firms noting a combination of resilient demand for construction materials and stretched supply had underpinned the latest round of price rises by vendors.
Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said the sector's confidence took a knock in June as optimism fell to it's lowest reading in 2017.
"Respondents cited continuing uncertainty in the run up to the election and Brexit negotiations for the hesitancy," he said.
"But, the housing sector continued to have the most get-up-and-go with the second fastest rise since December 2015, leaving the other sectors lagging behind.
"While new business wins were less in evidence, demand for materials remained high as suppliers scrabbled to meet the need for a number of materials in short supply and their performance worsened as their delivery times lengthened. The availability of skilled workers still remained an issue, with the slowest rise in employment levels for three months as a lack of new orders translated into restricted levels of hiring.
"With some doubt edging into the psyche of the construction industry about positive trading conditions, the sector will be guarding against continuing higher input prices with another eye on the possibility of rising interest rates as well."
(LM)
