UK construction activity continued to expand at its February rate in March. At 54.2 the sector PMI was unchanged from its mid-quarter reading and essentially in line with market expectations but, while still indicative of respectable growth, equalled its lowest mark since June 2013. Stronger gains in commercial work and civil engineering were offset by a further slowdown in residential building.
The increase in new orders was the smallest since the pre-election slowdown last April and put a brake on overall output. As a consequence, net new hiring saw its weakest advance since June 2013 while decreased subcontractor usage was reflected in the least marked increase in subcontractor wages in more than two and a half years. Confidence in the year ahead remained positive but was also the joint lowest since December 2014.
Declining growth of new business and a softening pace of pay rates suggests that UK construction is losing momentum. With house prices still under upside pressure due to the shortage of supply, this will not be what the BoE wants to hear.
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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