UK construction PMI beats forecasts, post-election rebound continues
The UK construction sector bounced back in June, according to a higher than expected reading of the Purchasing Managers’ Index (PMI) from Markit and the Chartered Institute of Procurement & Supply (CIPS).
Construction & Materials
9,822.47
16:59 26/04/24
Household Goods & Home Construction
12,702.92
16:59 26/04/24
After the sector hit a 22-month low in April, June's PMI reading came in at 58.1, higher than the 56.5 consensus forecast and from the 55.9 figure from May.
Economists suggested a much improved month boosted hopes that construction output returned to growth in the second quarter to help improve national GDP growth, with Friday's significant services sector PMI to be even more closely watched for this reason.
June's figure was well above the long-run survey average (54.6) and pointed to the fastest increase in overall construction activity since February, according to Markit and CIPS.
“UK construction companies experienced a growth rebound and surge in business confidence at the end of the second quarter. Survey respondents cited robust inflows of new work in June, adding to already strong order books across the sector," said Tim Moore, Markit's senior economist.
“Extra workloads and positivity regarding the year ahead outlook meant that job creation accelerated to its strongest so far in 2015."
He said the rebound in construction optimism was partly down to a post-election surge in confidence that underlying demand will continue to recover.
Persistent skill shortages in the construction sector are also contributing to sharp rises in labour costs in some areas, he added.
Howard Archer, chief economist at IHS Global Insight, said: "This is a really encouraging survey, although it needs to be borne in mind that the construction sector only accounts for 6.4% of GDP. Nevertheless, this is an antidote to the disappointing manufacturing purchasing survey for June."
He added: "A much improved purchasing managers’ survey for June boosts hopes and belief that the construction output returned to growth in the second quarter and contributed to improved GDP growth. Construction output contracted 0.2% quarter-on-quarter in the first quarter after expanding an upwardly revised 9.5% in 2014."