Pound Continues Lower Despite Construction PMI Rebound in October


construction pmi impact pound sterling

The Pound temporarily appreciated on Thursday after the release of survey data showed the Construction sector shifting from contraction to expansion in October.

The IHS Markit PMI for Construction, which quantifies responses by key purchasing manager personnel within the industry, rose from 48.1 in September to 50.8 for the recent month. The consensus expectation among economists had been for it to stay at 48.1.

Yet despite the rise in the headline figure, the Pound's gains were short-lived as a deeper reading of the statistics revealed a "subdued" outlook for the sector.

"The latest reading was weaker than the post-crisis trend (54.7) and signaled only a marginal rise in overall construction output," say the authors of the report, IHS Markit.

GBP Nov02 Markit

Despite a stronger house-building sector appearing to make up for weaker commercial and civil engineering sectors, the outlook for the sector is especially weak, says the report:

"Moreover, the balance of construction firms expecting an increase in business activity over the next 12 months eased to its weakest since December 2012."

The negative forward view had a dampening effect on employment conditions.

"Caution in terms of the outlook for construction workloads meant that employment numbers increased at one of the slowest rates seen over the past four years," the report states.

The commercial building appeared to be hampered by a lack of decision making amongst clients, possibly due to Brexit fears, while Civil engineering projects suffered due to a lack of replacement infrastructure projects to replace those being completed.

Even though the rate of new work being taken on increased marginally, it was at a much slower rate than the historical norm.

"Greater house building was the sole bright spot in an otherwise difficult month for the construction sector. Sustained declines in civil engineering and commercial activity meant that large areas of the building industry have become stuck in a rut," says IHS Markit, Associate Director, Tim Moore.

Brexit also reared its ugly head as a contributing factor tot he slowdown in the Commercial sector:

"With the lowest optimism since December 2012, purchasing managers blamed a slowdown in work from commercial clients, vanishing civil engineering projects and an increasing weariness over Brexit for the lack of performance, weak pipelines and slowdown in job hires," says Chartered Institute of Procurement & Supply Director of Customer Relationships Duncan Brock.


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