UK construction continued to surprise on the upside in May. At a solid 54.7, the sector PMI was nearly 2 points stronger than its April mark and even further above the market consensus. Indeed, the mid-quarter print pointed to the fastest rate of growth in two years.

Significantly, for the first time since May 2022 all of the three main subsectors expanded. Commercial building was again the best performer ahead of civil engineering while residential construction saw only a small gain.

Aggregate new orders increased for a fourth successive month and at a fast enough pace to prompt the first increase in headcount in five months. Purchasing activity also saw its first advance in nine months and business confidence improved to a 3-month high as input costs increased only marginally.

In sum, the May data provide further promising pointers for the UK construction sector and should be reflected in an upturn in construction output following five falls in the six months to March. Today's report may increase slightly the likelihood of no change from the BoE MPC meeting this month. Today's data lift the UK RPI to minus 11 and the RPI-P to minus 17, both measures now showing only a limited degree of overall economic underperformance.

The sector PMI is expected to ease from April's surprisingly firm 53.0 to 52.3.

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.