U.K. construction PMI signals slowdown in pace of decline

Construction firms in the U.K. showed a sustained decline in business activity in August; however, the pace of fall was just marginal and weaker than the seven-year record seen in July. The seasonally adjusted Markit/CIPS UK Construction PMI continued to remain below the 50.0 no-change threshold for the third straight month. But the index rose to 49.2 from July’s 45.9, signalling the slowest pace of decline since the downturn started in June.

Sub-sector data showed slower reductions in housing activity and commercial building than the one recorded in July. The pace of contraction in both cases was the slowest for three months in August. In the meantime, civil engineering activity stabilized in the month after falling in the earlier month.

According to survey respondents’ reports, Brexit uncertainty continued to be a break on construction sector in August, particularly in terms of house building and commercial work. But, a number of companies noted that sales volumes were more resilient than anticipated. Certain panel members also commented on signs of a recovery in client confidence from the lows seen earlier this summer, noted Markit Economics.

The recent data underlined that incoming new work fell at the slowest pace since May. Signs of a more stable trend for new business volumes led to a marginal expansion of staffing levels throughout the construction sector in August. But sub-contractor usage continued to fall, and rates charged by sub-contractors increased at the second slowest rate since June 2013.

Construction companies also lowered their purchasing activity in August that extended the current period of fall to three months. Weaker demand for construction materials led to the least marked deterioration in supplier performance since April. Construction firms have indicated towards a recovery in business sentiment in the future from July’s 39-month low.