UK Construction Beats Expectations in February But Devil is in the Detail

A survey of managers in the construction industry revealed a 'constructive' outlook for the sector than had been previously expected.

The survey of purchasing managers (PMI) conducted by financial information provider Markit, showed a rise to 52.5 in February from 52.2 previously when no change had been expected by most analysts.

The rise was surprising given the slowdown in Manufacturing activity in February suggested by the same survey for Manufacturing released on Wednesday.

However, the data belied an imbalance in favour of civil engineering whilst residential building and commercial projects actually appeared to have slowed down during the survey period.

“Residential activity increased at the slowest pace for six months, while commercial building declined for the first time since October 2016,” stated the report from Markit.

Other key results showed a continued rise in employment but a fall in new orders to its lowest level in four months, as well as massive cost inflation due to the rise in price of imported materials, as a result of the weaker Pound.

Sterling actually weakened against the Dollar following the release, declining from the 1.2280s to 1.2260s.

The Pound initially strengthened versus the Euro after the release, rising to 1.1665 from 1.1650, but gave back those gains within minutes returning to its pre-release level afterwards.

“Housing was singled out as a drag with its weakest performance for six months. As a previous driver of growth, there will be concerns about this softening of house building activity.

“The drop in sub-contractor availability was the largest seen since January 2016, against a back drop of rising employment numbers across the construction sector, which will add to worries around labour market capacity as we move along the path to Brexit,” commented Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply.