Construction had a very good July. The sector PMI weighed in at 55.3, up from June's 52.2 and indicative of the fastest pace of growth in 26 months. The latest reading was also well above the market consensus.

All of the three main categories posted gains, notably civil engineering which enjoyed its best period in almost two-and-a-half years. The pick-up was led by new orders which expanded for a sixth straight month and by the most since April 2022. As a result, both purchasing activity and headcount grew significantly more quickly than in June. Sub-contractor usage also rose for a fourth successive month and, despite dipping, business confidence remained very optimistic.

However, stronger activity helped to boost input costs and the rate of inflation accelerated to its joint-highest in 14 months.

The removal of election uncertainty may have provided a lift but the overall tone of the July report is solid and hardly suggests that the construction sector is in dire need of another cut in Bank Rate. Indeed, mounting cost pressures will need watching closely. Today's data put the UK RPI at 18 and the RPI-P at 17, both readings showing recent overall economic activity performing slightly more robustly than forecast.

The sector PMI is expected to slip from 52.2 in June to 51.0.

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.