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Construction PMI: Another Strong Beat

Construction sector PMI

The UK construction sector continues to grow at a clip according to latest survey data from IHS Markit and the CIPS.

January 4th’s construction PMI release shows a reading of 54.2 in December, well ahead of analysts estimates for 52.8.

The strong beat on estimates echoes a similar outturn delivered by January 3’s manufacturing PMI release.

The construction sector reading represents the strongest figure seen in 11 months.

IHS Markit at the CIPS says their survey of the sector confirms stronger demand patterns resulting in sustained job creation and a broad-based upturn in business activity during December.

“The residential sector raced ahead this month, with the fastest pace of growth since January 2016. Strong pipelines of new work were reported across all sub-sectors, and construction firms showed improved confidence after the impacts of uncertainty around the EU referendum,” says David Noble, Group CEO at the CIPS.

However, anchors to growth are being applied by “intense cost pressures” as suppliers passed on higher imported raw material prices thanks to the ~15% decline in the value of the Pound since the referendum.

Indeed, the latest rise in overall input costs was the steepest for just over five-and-a-half years.

Concerning the outlook for the sector, there remains an air of caution amongst analysts and commentators, as has been the case ever since the June 23 2016 EU referendum.

“With Article 50 due to be triggered in a few months’ time, uncertainty will surely affect the construction industry for the foreseeable future. Long term planning for construction projects is sure to become more challenging, but today’s data indicates a solid foundation remains,” says Dennis de Jong, Managing Director at UFX.com.

From a currency perspective there has been no discernible impact on Sterling as the sector accounts for a very small portion of UK economic activity.

The big one to watch will be Thursday’s services PMI release as this sector accounts for more than 80% of the economy.

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