UK construction sector sees post-Omicron bounce in January – PMI

LONDON (Reuters) – Britain’s construction sector grew at its fastest pace in six months in January as worries about the latest wave of COVID-19 cases ebbed and cost pressures further diminished, a survey showed on Friday.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) rose to 56.3 – the highest reading since July last year – after touching a three-month low of 54.3 in December.

A Reuters poll of economists had pointed to another reading of 54.3.

“UK construction companies started the year on a strong footing as business activity picked up speed and new orders expanded to the greatest extent since last August,” Tim Moore, Director at IHS Markit, which compiles the survey said.

“Higher energy, transport and raw material bills led to across-the-board increases in input prices during January, but fewer supply issues helped ease the overall rate of cost inflation to its lowest since March 2021.”

The commercial sector benefitted from a reduction in concerns about the Omicron coronavirus variant which boosted the outlook for 2022.

But residential work was its slowest in four months, suggesting that cost-of-living concerns and rising interest rates could cool a post-lockdown surge in spending, Moore said.

On Thursday, the Bank of England raised rates for the second time in less than two months and said further modest increases were likely.

The all-sector PMI, which combines the construction, manufacturing and services sectors, rose to 54.4 from December’s 53.6 which was its lowest since February, reflecting the hit to consumer-facing businesses from Omicron’s spread.

(Reporting by William Schomberg, editing by Andy Bruce and Toby Chopra)