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UK construction PMI rose to 53.2, but underlying data paints less rosy picture

UK PMI construction rose to 53.2 in October, up from 52.1 and beat expectation of 52.1. Markit noted “fastest growth in civil engineering since July 2017”. However, there was “slower rise in new projects at construction companies:” and “business optimism weakest in nearly six years”.

Trevor Balchin, Economics Director at IHS Markit, which compiles the survey:

“Although total UK construction activity rose at a stronger pace in October, the underlying survey data paint a less rosy picture for the sector towards the end of the year.

“New contracts increased at only a modest pace, and firms were the least optimistic regarding the 12-month outlook for nearly six years. Construction companies again linked uncertainty to Brexit negotiations, which influenced delays to final decisions at clients.

“Moreover, the higher total activity figure reflected the civil engineering sector, which saw a rebound following declines in August and September. Housing and commercial construction activity both rose more slowly in October, and at rates that remained below long-run survey averages.

“More positively, construction firms continued to raise headcounts at a strong pace, suggesting they are not expecting an imminent contraction in demand. That said, if the new orders and expectations indices remain at current levels or fall further, the employment index could also drift back towards the 50.0 no-change mark.”

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