Construction industry shows signs of recovery, PMI survey says

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construction workers Image copyright PA

The UK construction industry showed signs of recovery in August, contracting less than in July, a survey has suggested.

The Markit/CIPS purchasing managers’ index (PMI) for the sector rose to 49.2 in August, but stayed below the 50 level, which indicates contraction.

The index was up from July’s figures of 45.9, its lowest for seven years.

However, the Brexit vote was still the main factor weighing on activity, the report said.

Tim Moore, senior economist at Markit, said: “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.”

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David Noble, group chief executive at the Chartered Institute of Procurement & Supply, added that the weak pound had pushed up purchasing costs for the sector “at a rate not seen for half a decade”.

“Firms reduced their purchasing volumes as a result, as new orders and activity continued to fall – though at a more moderate rate compared to last month,” he added.

Industry recession

Samuel Tombs, chief UK economist with Pantheon Macroeconomics, said that “construction will continue to struggle until business confidence improves”.

He said the downturn in construction “looks likely to continue for several quarters to come” due to protracted Brexit negotiations and long lead times for any major public sector projects arising from investments announced in the Autumn Statement.

Official figures last month showed the industry had fallen back into recession for the first time in four years.

The Office for National Statistics (ONS) said construction output dropped by 0.7% in the second quarter, following a 0.3% fall in the first quarter, meaning the industry recorded two consecutive quarters of negative growth for the first time since 2012.

Markit’s construction figures come ahead of its PMI for the UK’s dominant service sector due out on Monday.

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