In line with manufacturing, UK construction looks to have had a better than expected time of it in August. Although still below the key 50 growth threshold, the sector PMI weighed in at 49.2, up from July's 45.9, comfortably ahead of the market consensus and, on paper at least, indicative of near-stabilisation in business activity.
Compared with July, smaller falls were seen in both housing and commercial building, in both cases the least marked in three months. Civil engineering was flat. Crucially, new orders saw their best month since May and staffing levels actually rose marginally. Nonetheless, sub-contractor usage continued to decrease and, reflecting this, rates charged by these firms rose at their second slowest pace since June 2013. Moreover, purchasing activity was down once more and business confidence in the year ahead, while up on July, was still close to its weakest mark in the last three years.
Meantime, Brexit effects were again apparent in another jump in input cost inflation which posted its highest level since July 2011.
Overall today's findings are hardly great but they are a good deal better than they might have been. As with all of the recent survey data, the August construction PMI will be subject to unusually high levels of volatility as businesses react to the Brexit vote. Still, in line with yesterday's findings in manufacturing (see calendar PMI entry), the construction sector does not seem to be faring as badly as many anticipated.
The Construction Purchasing Managers' Index (PMI) provides an estimate of business activity in the UK construction sector for the preceding month 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 gross domestic product. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and Markit.
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.