UK Construction PMI Returns to Growth, Beats Expectation

• UK Construction PMI Returns to Growth, Beats Expectation

The UK construction sector expanded in September as companies returned to growth.

The construction purchasing managers’ index climbed to 52.3 from 49.2 recorded in August. A reading above 50 separates expansion from contraction — this is the first expansion in four months, Markit reported on Tuesday.

According to the report, the main driver was the solid rebound in residential activity, which boosted overall construction output in September. Also new orders rebounded, ending a four-month period of sustained decline.

Tim Moore, senior economist at Markit, said: “UK construction companies moved back into expansion mode during September, led by a swift recovery in residential building from the three-anda-half year low recorded in June. Resilient housing market conditions and a renewed upturn in civil engineering activity helped to drive an overall improvement in construction output volumes for the first time since the EU referendum.”

“A number of survey respondents noted that Brexit-related anxiety has receded among clients, although it remained a factor behind the ongoing decline in commercial building work.”

The data helped to lift the pound off a 31-year low of $1.2766, as the currency continued to be weighed down by Prime Minister Theresa May’s vow to trigger Article 50 by March.

“The next support level is at 1.25 and the resistance is at 1.31,” said Naeem Aslam, chief market analyst at Think Markets.

Howard Archer, chief UK and European economist at IHS Global Insight, said it was a “relatively decent survey” that offers reassurance on the sector, albeit not matching the impressive corresponding survey on manufacturing.

“While the construction sector is still hardly racing ahead, a pick-up in orders in September supports hopes that activity will keep growing.

“The government will be particularly pleased to see housebuilding returning to growth in September and at an 8-month high given the housing market shortage, although much needs to be done on this front. Indeed, the Chancellor is prioritising housebuilding initiatives as he looks to support the economy as the Brexit process gets underway.”