Markit/CIPS UK Construction PMI released for August

The construction industry appears to be edging towards stability according to the latest Markit/CIPS UK Construction PMI figures.

Although output in August fell for the third consecutive month and remained blow the  50.0 threshold of no change, the construction PMI reading was up to 49.2 from July’s 85 month low figure of 45.9 .

This figure was much higher than the 46.3 numerous economic experts were predicting.

The housing and commercial sectors both saw much slower reductions than in July. Both sectors experienced their slowest rate of contraction for three months.

There was also stability in the civil engineering sector following a fall in July.

The report said that respondents felt that the uncertainty surrounding Brexit was still holding back the construction industry, particularly in terms of house building and commercial activity.

Some companies also reported that sales volumes were stronger than expected, while there a more upbeat outlook reported in client confidence after it took a hit earlier in the summer.

More signs of stability within the construction industry came with slight increase in employment in August. However, the use of sub-contractors continued to fall as their rates charged increased at the second-slowest level since June 2013.

August also saw a reduction in purchasing activity for the third consecutive month.

Business confidence improved to its highest level since May but was still amongst the lowest recorded in the last three years.

Tim Moore, Senior Economist at Markit commented: “The downturn in UK construction activity has eased considerably since July, primarily helped by a much slower decline in commercial building. Construction firms cited a nascent recovery in client confidence since the EU referendum result and a relatively steady flow of invitations to tender in August.

“However, the latest survey indicates only a partial move towards stabilisation, rather than a return to business as usual across the construction sector. There were still widespread reports that Brexit uncertainty had dampened demand and slowed progress on planned developments, especially in relation to large projects.

Mr Moore said that despite  reduced output, the latest figures could be seen as  “welcome news” after the difficulties experienced over the summer.

He said: “The move towards stabilisation chimes with the more upbeat UK manufacturing PMI data for August, and provides hope that the near-term fallout from Brexit uncertainty will prove less severe than feared.”

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