GB: PMI Construction

Wed Jan 03 03:30:00 CST 2018

Consensus Actual Previous
Level 53.2 52.2 53.1

UK construction activity unexpectedly slowed at year-end. The sector PMI weighed in at 52.2, down almost a full point versus its November reading but at least its third consecutive month above the 50 growth threshold.

House building expanded for a sixteenth straight month but civil engineering was only flat (albeit following three successive declines) while commercial construction posted a moderate fall.

However, it was not all bad news as the survey found the strongest increase in aggregate new orders since May and the largest rise in input buying in two years. Employment was also up and suppliers' delivery times continued to lengthen. Even so, business confidence about prospects for 2018 was subdued and amongst the weakest recorded since mid-2013.

Meantime, input cost inflation rose but remained below February's peak. Sterling weakness continues to impact here although the effects are now less marked than earlier in the year.

In sum, the December results constitute a mixed bag and reflect a highly uncertain UK economic outlook amidst the ongoing Brexit negotiations. The bottom line is that conditions in the construction sector could be a lot better but they also could be an awful lot worse.

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.