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CONSTRUCTION BEATS: Britain's construction sector is fighting back from Brexit

Nov 2, 2016, 15:16 IST

A nation of builders?Chris Ratcliffe/Getty Images

Britain's construction sector expanded for a second consecutive month in October, according to the latest data released by IHS Markit on Wednesday morning.

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IHS Markit and CIPS' latest PMI release for the construction sector - which measures expectations of growth - came in at 52.6 for the month.

That was a little higher than the 52.3 reading from September, and well above the 51.8 that was expected by economists polled before the release.

The purchasing managers index (PMI) figures from IHS Markit are given as a number between 0 and 100.

Anything above 50 signals growth, while anything below means a contraction in activity - so the higher the number is, the better things look for the UK.

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Construction PMIs collapsed in the immediate aftermath of the UK's vote to leave the European Union, but as the dust settled the ship steadied somewhat in August, before returning to growth in September, shocking economists. That expansion continued in the first month of the fourth quarter.

Here is the chart, showing October's move upwards:

IHS Markit/CIPS

Speaking about the results, Tim Moore, a senior economist at Markit said:

"The UK construction sector has started the fourth quarter in a positive fashion, with the latest survey data revealing a moderate rebound from the downturn seen during the summer.

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"Construction growth was dependent on a solid recovery in residential work, as civil engineering and commercial building struggled for momentum in October."

Moore did warn however, that there are worrying "Brexit-related" signs for the sector, adding:

"While business activity has picked up since the third quarter, the recent phase of new order growth has been the weakest for three-and-a-half years. Survey respondents noted that Brexit-related uncertainty and concerns about the UK economic outlook had held back investment spending.

"Subdued new order intakes contributed to a fall in construction sector business confidence for the first time since July. At the same time, a sharp pace of input price inflation added to construction firms' anxieties about the year-ahead business outlook, with higher costs overwhelmingly linked to supplier price hikes in response to the weak pound."

It is worth noting that while it is widely respected, IHS Markit's PMI is not a hard data point, with recent official data suggesting that the sector fell into recession in the first half of the year.

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In mid-August, numbers from the ONS showed that the British construction industry, the sector of the economy that makes sure we have got roofs over our heads and offices to work in, slipped into recession during the first six months of 2016. Construction output dropped by 2.2% year-on-year in June, following on from a 1.6% y-o-y fall in May.

The construction PMI follows on from a miss in Tuesday's manufacturing PMI release. IHS Markit's growth data showed that Britain's factories recorded activity of 54.3 in October, down substantially from September's reading. Economists were expecting October's IHS Markit figure to come in at 54.5, a slowdown from September's figure of 55.4.

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