GB: PMI Construction

Mon Jun 04 03:30:00 CDT 2018

Consensus Actual Previous
Level 52.0 52.5 52.5

UK construction saw no change in activity rates in May. At 52.5, the sector PMI exactly matched its unrevised April outturn which, while slightly firmer than expected, signalled another month of only modest improvement.

Residential building was the best performing sub-sector for a third month running although even here the pace of expansion eased from April's weather-boosted 11-month high. Both the commercial and civil engineering sectors also made limited ground with the former actually achieving a slight acceleration from last time.

Still, the stability of the headline index masked another contraction in order books which shrank for a fourth time in the last five months, albeit at a reduced pace versus the first quarter. In similar vein, job creation slowed to a 4-month low, although in part this was due to shortages of skilled labour. Another rise in supplier delivery times was also testimony to rising pressures on capacity and input costs climbed sharply enough to ensure that inflation saw its strongest mark since February. Ominously, optimism about the year ahead posted its weakest outturn in seven months.

In sum, the May report is in line with sluggish growth of construction this quarter and without some improvement in demand soon, the third quarter may not any better.

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.