UK construction sector: In December, there were indications that the downturn in the UK construction sector, triggered by a notable rise in interest rates, might be easing, according to a survey released on Friday. 

The S&P Global/CIPS UK Construction Purchasing Managers' Index (PMI) increased to 46.8, up from November's 45.5, although it remained below the growth threshold of 50.0 for the fourth consecutive month.

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Despite concerns about the economic outlook, particularly for commercial projects, construction companies showed a level of optimism, attributed to expectations of a potential reduction in interest rates in the coming months, as mentioned by Tim Moore, Economics Director at S&P Global. 

Commercial construction experienced its most notable contraction since January 2021, influenced by the Bank of England's consecutive 14 interest rate hikes aimed at curbing inflation, resulting in the highest benchmark interest rate in 15 years.

However, the survey indicated that around 41 per cent of participating firms anticipated a rise in business activity throughout 2024, with only 17 per cent predicting a decline. This marked a notable shift from the overall negative sentiment observed a year earlier. 

Although house-building continued to weigh on the sector, the rate of decline was the least severe since July of the previous year. Similarly, civil engineering activity contracted at a milder pace in December.

While input prices for the construction sector as a whole decreased, the decline was less pronounced compared to November when raw material costs experienced the swiftest drop since July 2009. 

Notably, the weakness in the construction sector contrasts with the robust growth observed in S&P Global's measure of the larger services sector, which exceeded expectations the previous month.

The all-sector PMI, combining construction data with earlier-released figures for the services and manufacturing sectors, climbed to 51.7 in December from 50.2 in November, reaching its highest level since June.

(With Reuters Inputs)