Construction PMI signals a sector under strain as weak demand, rising costs and uncertainty bite

Atul Kariya, head of real estate and construction at MHA, comments on today’s S&P construction PMI data: 

“Today’s construction PMI underlines a sector still being heavily squeezed by weak demand and renewed cost inflation, with rising energy prices due to the conflict in the Middle East adding fresh pressure to an already fragile situation. The decline is being felt across all subsectors with civil engineering facing the steepest decline followed by housebuilding. Housebuilders have been impacted as higher input costs hit supply chains just as buyer confidence and mortgage affordability come under strain. However,  commercial work has been somewhat more resilient due to energy related activity but still faced the sharpest decline so far this year.

“The bigger issue across the sector is not just margins, but uncertainty which is delaying project starts and investment decisions. Higher build costs, tighter viability, and interest rate uncertainty are making land buying, tendering, and project timing harder to judge. As a result, there is a growing risk that decisions will be postponed until pricing and borrowing costs stabilise.”

“The result is a sector under real pressure.  Construction across the country remains held back by affordability pressures, planning constraints and weak confidence. Nor is the outlook particularly promising. Unless inflation and financing conditions improve, activity is likely to stay subdued in the near term.”