Not for the first time in recent months UK construction outperformed market expectations. At 52.6, the sector PMI climbed 0.3 points versus its unrevised September print and so held above the 50 growth threshold for the second month in a row.
The housing market remained the main bull factor and residential building expanded at a decent rate that was only just short of September's 8-month high. Elsewhere, commercial construction stabilised while civil engineering posted a slight decline.
Growth of new business was moderate but well down on the rates seen earlier in the year. Not surprisingly, Brexit uncertainties were a major influence here and the same factor contributed towards a slide in business optimism to its second lowest reading since May 2013. Even so, headcount was up and there was a more marked deterioration in supplier performance. Meantime, input costs increased at the second fastest pace since July 2011 courtesy of sterling weakness to place additional pressure on margins.
Overall the October results are quite respectable. There is still plenty of reason for being cautious about construction activity going forward but for now momentum appears to be holding up quite well. This should not be wasted on the BoE MPC meeting tomorrow.
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.