UK construction had another good month in December. At 57.8 the sector PMI was comfortably stronger than both market expectations and November's 7-month low (unrevised 55.3).
Commercial building was the best performer, posting its sharpest gain since October 2014. Housing was not far behind but civil engineering saw a marginal decline following a 7-month period of positive growth.
The year-end benefitted from a robust and sharper increase in new business inflows which in turn helped to ensure a sizeable rise in headcount from the mid-quarter's 26-month low. Meantime, capacity issues were again apparent in the steepest drop in vendor performance since June and the largest jump in sub-contractor usage since August 2014. Even so, overall input cost inflation decelerated again, mainly reflecting lower transportation and steel prices. Business sentiment slipped to its lowest mark since February but remained well above its post-crisis average.
Overall the December report is very promising and suggests that the construction industry was in good shape at the end of the year and, with healthy order books, well poised to make a solid start to 2016.
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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