UK Economy "Entering a Period of Strength" on Impressive Construction PMI Reading
The UK’s construction sector saw activity levels surge in the month of May according to the most reliable report available on the matter.
IHS Markit and the CIPS report that their Construction PMI reading for May was at 56, well ahead of forecasts for 52.7.
This is a staggering outturn and points to an improvement in UK economic activity in the second quarter of 2017.
IHS Markit and the CIPS say UK construction companies experienced a sharp rebound in business activity during May, helped by the fastest upturn in residential work since the end of 2015.
The unexpected recovery in construction has been felt most acutely in residential housing as builders finally feel able to respond to demand for new homes,” says Duncan Brock at the CIPS.
The activity reflects reports out last week that England has seen house-building activity hit a ten-year high.
The latest survey also revealed a sustained recovery in new work, following the soft patch seen during the first quarter of 2017
“The rapid upturn in production is putting considerable pressure on construction supply
chains. Suppliers are struggling to meet demand while there is a growing shortage of contractors to complete work,” says Brock.
Despite the improvement in new work, construction firms noted that heightened economic uncertainty continued to act as a brake on client spending.
“With the UK construction PMI reading hitting the highest level since 2015, it is clear that the economy is moving into a period of strength, throwing doubt into the common belief that we are shifting into a period of weakness for the UK,” says Joshua Mahony at IG in London.
The beat on expectations mirrors a similar pleasant surprise witnessed in the manufacturing sector, as reported on June 1.
Monday’s services PMI reading is certainly the big one which will really have by far the biggest impact on growth expectations, yet if the manufacturing and construction readings are anything to go by, “May looks like a blockbuster month for the UK economy,” says Mahony.
