UK construction continued to expand in November and at a marginally faster rate than in October. The sector PMI weighed in at 52.8, a little ahead of forecasts, a couple of ticks above its reading at the start of the quarter and its third consecutive month above the 50 growth threshold. It was also the strongest reading since March.
Residential building was again the best performer despite activity rates here slipping to a 3-month low. Commercial construction saw a marginal rebound while civil engineering remained the weakest of the three subsectors.
New business posted its largest increase in eight months, boding well for sustained growth of activity into early 2017, and employment similarly recorded a solid rise. However, costs remained on a steep uptrend and inflation touched its highest mark in more than five and a half years. At the same time, stronger demand and low stocks led to the sharpest deterioration in vendor performance since June.
However, despite a generally positive report, only 45 percent of respondents anticipate a rise in activity next year, one of the lowest readings since the middle of 2013. Businesses are still cautious and confidence remains below its level in the first half of the year. So, while the sector is doing quite well at the moment, the medium-term outlook is much less clear.
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.