GB: PMI Construction

Tue Jul 04 03:30:00 CDT 2017

Consensus Actual Previous
Level 55.0 54.8 56.0

UK construction activity slowed slightly more quickly than expected in June. At 54.8, the sector PMI was more than a full point short of its unrevised May reading, itself a 17-month peak.

Growth of both new business and employment decelerated versus mid-quarter amidst reports from respondents about new political uncertainty at home and the ongoing confusion over what shape any Brexit package might take. Prospects for the year ahead were also put at their weakest level since December 2016.

Some cooling in activity rates was recorded in all of the three main subsectors. However, the increase in housing construction, which again outperformed the other categories, was still the second largest since the end of 2015. Indeed, evidence of continued pressure on capacity was apparent in the second sharpest deterioration in supplier performance in more than two years.

To this end, average cost burdens rose steeply again, in part reflecting exchange rate developments but also sustained strong demand for materials.

Despite the headline PMI decline, in general the construction industry seems to be holding up well. There may be creeping doubts about the outlook, but for now it looks as the sector is poised for a decent third quarter.

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.