GB: PMI Construction

Mon Sep 04 03:30:00 CDT 2017

Consensus Actual Previous
Level 52.0 51.1 51.9

UK construction continued to slow in August. At 51.1, the sector PMI was 0.8 points short of its unrevised July reading, beneath market expectations and at its lowest level in twelve months.

However, the headline drop at least masked relative strength in residential building where activity rates accelerated at a robust pace. Still, civil engineering was only flat while commercial work fell at the sharpest rate in a year.

Ominously, overall new business declined for a second consecutive month and, while only marginal, contributed towards the smallest net increase in headcount since July last year. In the same vein, sub-contractor usage extended the downward trend that began in March. A further lengthening in supplier delivery times pointed to ongoing supply-side pressures but input cost inflation was the weakest since September 2016.

Today's survey results show construction companies increasingly cautious about the economic outlook and so less prepared to embark on major new spending programmes. Indeed, but for some surprising resilience in housing, the overall picture would have looked quite grim. It would seem that construction is in for a lean time over coming months.

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.