UK Construction Back in the Green

The UK’s construction sector is back in the green in data released for the month of September, as I re-enters growth territory. There was a rise from 49.2 recorded in August to 52.3 in September. This is the first positive reading since the month of May. Analysts surveyed by Thomson Reuters had shown an average anticipation for a PMI index value of only 49. The reversal has mostly resulted from the growth in residential building, which is currently at its highest level since January. Survey respondents saw civil engineering activity rise to its fastest pace since March. On the flipside commercial construction activity is in decline for the fourth straight month.

Higher levels of construction activity were mostly aided by a spike in new work for firms, the first bump higher since April. According to Markit, anecdotal evidence suggested an improving economy and housing-related demand were the biggest contributor to an increase in new work.

Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “UK construction companies moved back into expansion mode during September, led by a swift recovery in residential building from the three-and-a-half year low recorded in June. Resilient housing market conditions and a renewed upturn in civil engineering activity helped to drive an overall improvement in construction output volumes for the first time since the European Union referendum. A number of survey respondents noted that Brexit-related anxiety has receded among clients, although it remained a factor behind the ongoing decline in commercial building work. Construction firms appear reasonably optimistic about the near-term outlook, with confidence linked to the fastest rise in new orders since March and a more upbeat economic newsflow in general.”

Markit also noted that conditions in the UK manufacturing sector continued to improve at the end of the third quarter as the Markit/CIPS Purchasing Managers’ Index (PMI) rose to its highest level since June 2014, with a score of 55.4 in September, up from 53.4 in August.

In the moments following the data release, The GBP was seen adding to the previous day’s losses, moving to a new 31-year low versus its US counterpart in today’s trading session. The GBP/USD is trading lower by 68 bps to $1.2753, slightly below where it was prior to the release. The FTSE 100 is continuing its weekly advance, rising 1.52% to 7,089.68 in the morning hours.