The UK housebuilding sector has suffered a significant setback due to higher mortgage rates, leading to a sharp downturn in construction activity. This decline has reversed a period of growth observed in the wider construction industry last month.
According to the latest S&P Global/CIPS construction purchasing managers' index (PMI), the score for June stood at 48.9, dropping from May's 51.6. This marks the first decrease in construction activity for UK companies in five months. A score below 50 indicates a decline, while anything above suggests growth.
Economists were taken by surprise as the PMI score fell below their expectations. The consensus predicted a reading of 50, which would have indicated a flat sector. Instead, weaker demand for new homes dampened housebuilding activity, resulting in the fastest contraction in three years. The last time such a decline was observed outside of pandemic-related disruptions was in 2009.
