UK construction activity continued to cool in March. At 52.2, the sector PMI was 0.3 points short of its unrevised February mark and a tick below market expectations. It also equalled its weakest level since the upturn began in September 2016.
Slower growth was mainly attributable to the housing market where a smaller rise in construction more than offset stronger rates in both commercial work and civil engineering. Indeed, civil engineering recorded its best advance so far this year.
In fact, despite the aggregate slowdown, employment again expanded at a healthy clip and sub-contractor usage remained firm enough to ensure another sharp drop in availability. Vendor performance similarly deteriorated at one of the fastest rates seen over the last two years. The survey found Brexit worries less of an issue and, although new orders were only slightly firmer, business confidence regarding the year ahead improved.
Nonetheless, input cost inflation was again strong, albeit below the eight-and-a-half-year peak registered in February.
Overall, the report is consistent with yesterday's manufacturing PMI (see calendar entry) in pointing to some deceleration in UK economic growth last quarter. Tomorrow's service sector PMI will complete the jigsaw.
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.