Construction activity expanded again in May. At 51.6, the sector PMI continues to indicate only sluggish growth but the latest reading was up from April's 51.1 and a little firmer than the market consensus.

Commercial work (54.2) enjoyed another good month with output rising at a solid and accelerated rate and civil engineering (53.9) was not far behind. However, house building (42.7) contracted for a sixth straight month and at the fastest rate in more than 14 years.

Even so, aggregate new orders rose by the most since April last year and this prompted further additions to headcount. Earlier unwanted inventory accumulation meant input buying was only pegged at its April level but, while dipping to a 4-month low, business confidence in the year ahead remained upbeat with around 45 percent of companies anticipating an increase in output versus just 14 percent expecting a decline. Input costs posted another marked gain but inflation was still the weakest in more than two-and-a-half years.

In sum, but for the downturn in the residential sector, the May results would be quite impressive. As it is, the signs are that rising mortgage costs are undermining would-be buyers and with Bank Rate likely to climb higher later this month, no early turnaround seems likely. That said, today's update puts the UK ECDI at 24 and the ECDI-P at 20. Both readings are quite well in positive surprise territory.

The sector PMI is put at 51.0, just 0.1 point short of its April reading.

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 S&P Global.

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.