The UK construction industry cooled somewhat in November. At 55.3 the sector PMI was down more than 3 points from its unrevised October reading and at its lowest level in seven months. That said, the latest print was still well into solid growth territory and firms remain highly optimistic about the business outlook.
Slower growth of new business was largely responsible for the headline decline and this in turn contributed to a much smaller increase in employment than the 11-month high recorded at the start of the quarter. Input buying also expanded more modestly although vendor performance continued to deteriorate amidst further reports of stock shortages and pressure on capacity.
Sub-contractor usage still rose at a solid rate but the increase in their average charges was the smallest in almost two years. Indeed, overall input cost inflation moderated and was well below its long-run average.
The November results point to an overdue deceleration in activity rates in the construction industry. However, the overall picture remains positive enough and if costs pressures are beginning to ease slightly, the BoE will certainly not be unhappy.
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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