UK construction PMI rises slightly ahead of forecasts in July

Economic News

UK construction PMI rises slightly ahead of forecasts in July

Thu, 02 August 2012
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UK construction PMI rises slightly ahead of forecasts in July

-Commercial output rises
-Civil engineering and house building decline
-Second-fastest fall in new work for two and a half years
-Construction companies continue to hope for improvement

The Markit/CIPS purchasing managers´ index for the UK´s construction sector rose to 51.9 in July, up from 48.2 in the month before, for a slight rebound from June´s two and a half year lows.

The consensus estimate was for a smaller improvement to 48.7.

Nevertheless, the latest reading was, “well below the long-run series average (54.2) and pointed to only a marginal expansion of overall UK construction output,” Markit points out this morning.

Growth was largely confined to the commercial subsector in July, as house building and civil engineering activity continued to decline. The latest reduction in civil engineering was the second fastest since September 2011.

New work received by construction companies fell at the second-fastest rate since January 2010.

Input prices increased in July, thereby extending the current period of cost inflation to two-and-a-half years. However, the latest increase was relatively subdued and slower than the long-run series average.

Hope springs eternal

Survey respondents remain optimistic, overall, that output will rise in 12 months’ time, and the degree of positive sentiment was the strongest since April. Anecdotal evidence cited a gradual rebound in output, boosted by the resumption of delayed projects. Confidence about the outlook for activity helped support a marginal rise in employment in July, which was the fourth increase in the past five months.

Tim Moore, Senior Economist at Markit said:

“July’s survey offered little sign of an imminent rebound in the UK construction sector, with total activity rising only marginally after well documented temporary factors had weighed on output last month.

“However, the survey shows that some construction firms are expecting, or at least hoping, that the sector will receive a shot in the arm during the next 12 months. A slow and gradual recovery remains most firms’ base scenario, with some anticipating a boost from deferred projects going ahead later in the year. This in turn pushed business sentiment up from June’s recent low and supported employment trends across the industry in July.”