Construction had another good month in August with activity rates slightly above their July level, albeit just short of expectations. At 57.3, the sector PMI was 0.2 points stronger than at the start of the month and easily high enough to signal continued solid growth.
Residential building again led the way and commercial activity also accelerated, producing its best performance since May. By contrast, civil engineering slowed to its weakest rate in three months.
Promisingly, new business was up across the sector and, despite easing to its weakest pace since May, pointed to a bullish near-term outlook. Indeed, some 53 percent of respondents anticipate higher activity rates over the coming year, comfortably above the survey's long-run average. Accordingly, headcount continued to expand at a healthy clip and what is now twenty-seven consecutive months of rising employment constitutes the longest run in more than nine years.
Sub-contractor usage also rose again but while contractor charges were up quite sharply, inflation here slipped to its lowest mark since April. At the same time, reduced oil prices contributed towards the weakest overall rate of cost inflation in four months.
UK construction is still performing well. Capacity constraints remain an issue and rising wage bills will not be wasted on the BoE. Still, higher inventories and the shortest delivery times in three years suggest that pressures from this quarter may not be quite as marked as they were earlier in the year.
The Markit/CIPS UK Construction PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 170 construction companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on the regional and industry contribution to GDP. Unlike other PMIs, this PMI focuses on one industry, namely UK construction.
The survey is based on techniques successfully developed in the USA over the last 60 years by the National Association of Purchasing Management. It is designed to provide one of the earliest indicators of significant change in the economy. The data collected are not opinion on what might happen in the future, but hard facts on what is actually happening at 'grass roots' level in the economy. As such the information generated on economic trends pre-dates official government statistics by many months.
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