The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers' Index (PMI) dropped from 52.5 in February to 52.2 in March, the joint-slowest upturn in output since the current period of expansion began in September last year.
The slowdown has largely been put down to a weaker rise in residential building activity, which offset a rebound in both commercial and civil engineering activity.
New business growth expansion rates remained unchanged in March, holding at the four-month low reach in February. Participants noted a squeeze in client budgets had acted somewhat as a barrier on new business growth, with reports also suggesting planning delays and greater cost consciousness also contributing towards subdued growth.
However, reduced anxiety over Brexit, along with a resilient economic backdrop, has had a positive impact on new invitations to tender. Companies also recorded a rise in employment numbers in March, however the pace of job creation eased to a three-month low.
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Sub-contractor usage also declined slightly in March, with firms continuing to report a sharp drop in the number of available sub-contractors.
Input buying declined for only the second time since September 2016, which was mainly linked to subdued new business growth in March. In addition, low stocks among venders saw supplier performance deteriorate at one of the fastest rates seen over the past two years.
Input cost inflation remained strong in March, linked to higher prices for imported materials and global commodity price rises. However, the overall rate of cost inflation eased further from the eight-and-half year peak seen in January.
Looking head, companies remain relatively optimistic about their growth prospects, with almost half of respondents expects a rise in business activity, while 9% forecast a decline.
Tim Moore, Senior Economist at IHS Markit and author of the Markit/CIPS Construction PMI®, said: "UK construction firms experienced a growth slowdown in March, with the loss of momentum centred on housebuilding. A weaker trend for residential work has been reported throughout 2017 so far, which provides an indication that the cooling UK housing market has started to act as a drag on the construction sector.
"Civil engineering projects were the construction sector's main growth engine in March, driven by rising infrastructure spending and a strong pipeline of new work throughout the UK.
"March data showed a slight rebound in commercial construction activity. Survey respondents noted that the resilient economic backdrop and receding Brexit- related anxieties have helped to stabilise client demand after the disruption to development projects last summer.
"Despite a relatively subdued rise in new work during March, UK construction firms reported a more sanguine assessment of their year-ahead growth prospects. Business confidence was among the highest seen since the end of 2015, which construction companies linked to upcoming tender opportunities, plans for increased marketing expenditure and hopes of a sustained recovery in clients' willingness to spend."
(LM/CD)
