GB: PMI Construction

Thu Nov 02 04:30:00 CDT 2017

Consensus Actual Previous
Level 48.5 50.8 48.1

UK construction outperformed expectations in October. At 50.8, the sector PMI moved back into positive growth territory following a surprisingly sharp contraction in September (48.1).

The very modest improvement in overall conditions was attributable to commercial building, which expanded for a fourth consecutive month, and residential construction where activity rates were up on September but still relatively subdued compared with earlier in the year. Civil engineering was the weakest category amidst reports of a shortage of major projects.

Following three months of decline, aggregate new business expanded again but only sluggishly and the limited pick-up here failed to prevent business optimism from sliding to a 58-month low. Consequently, job creation was restrained. Even so, supply-side pressures were still significant and input costs climbed steeply, albeit not sufficiently to lift inflation above the near-6-year peak seen at the start of the year.

The October construction PMI results continue to reflect a combination of economic and political uncertainty, neither of which is likely to ease anytime soon. Still, the PMI's move back above 50 should slightly boost the chances of a BoE interest rate hike later today.

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.