GB: PMI Construction

May 3, 2017 03:30 CDT

Consensus Actual Previous
Level 52.0 53.1 52.2

UK construction posted its best performance so far this year in April. At 53.1, the sector PMI was up nearly a full point versus its unrevised March outturn and stronger than market expectations. However, it was also still well short of the post-Great Recession peak seen in January 2014 (64.6).

Civil engineering led the way, expanding at its fastest rate since March last year but residential building also climbed to a 4-month high. By contrast, commercial construction slowed with growth here only marginal and less than in March.

Still, aggregate new orders recorded their largest rise in 2017 to date and this prompted the sharpest increase in headcount since last May. The declining availability of sub-contractors was evidence of increasing supply-side shortages and this was similarly reflected in a marked and accelerated deterioration in vendor performance. Lead times lengthened by the greatest extent since June 2015.

Input costs continued to rise steeply although the rate of inflation moderated further from the five-and-a-half year peak seen in January.

Overall the April results are decent enough and suggest that the construction sector in general is holding up quite well. The rebound in housing is particularly promising after a poor March. Should tomorrow's service sector PMI at least match its March print (55.0), the implications would be that the economy started the second quarter in surprisingly good shape.

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.