UK construction had another very good month in October if the latest sector PMI survey is anything to go by. At 58.8 the headline index was down from an unrevised 59.9 in September but in line with market expectations and easily far enough above the 50 expansion threshold to signal another robust period for business activity.
Growth was apparent in all of the three main subsectors as aggregate new orders climbed more sharply than in any month since October 2014 and employment saw its largest increase in a year. Backlogs were also up again. Commercial building work was the main driver last month and, in contrast to a modest slowdown in both housing and civil engineering, activity rates here hit an 8-month high. Not surprisingly therefore, some 59 percent of companies are optimistic about the year-ahead outlook.
Also predictable was another fall in sub-contractor availability. Indeed, this was its twenty-eighth consecutive decline, the longest continuous period of decreases since 2003. Still, increased capacity at suppliers ensured the least strain on delivery times in almost five years which, combined with falling raw material costs, meant price pressures were less marked than in September.
Not for the first time the PMI results paint a decidedly more upbeat picture of construction than presented in the official statistics. According to the ONS, construction provisionally slumped some 2.2 percent on the quarter in the three months to September. Getting a real handle on developments is not easy at the moment but there may well be some revisions to the ONS figures in the pipeline.
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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