GB: PMI Construction

June 2, 2017 03:30 CDT

Consensus Actual Previous
Level 52.6 56.0 53.1

UK construction had a very good May with activity rates well up on a disappointingly low April reading and even further above market expectations. At 56.0, the headline index gained nearly 3 full points versus its unrevised April outturn to register a new 17-month high.

The improvement mainly reflected strength in the housing market where construction hit its highest rate since December 2015. Importantly, buoyant orders also pointed to sustained growth over coming months. Civil engineering similarly performed well and while commercial development was again the weakest sub-sector, even here expansion rates were the fastest since May last year.

Employment rose by the most since the start of 2016 but delivery times still lengthened by the greatest amount since March 2015. However, some firms suggested that the worst of the inflation pressures resulting from sterling's slide might have passed.

The May results are surprisingly upbeat and, following the latest fall in the Nationwide's HPI (see Thursday's calendar entry), provide hope that the cooling housing market will see a soft landing. Either way, the report is bullish for second quarter GDP prospects.

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.