U.K. construction activity rises slightly in October, but sentiment falls

Construction firms in the U.K. have hinted that business conditions continued to be weak in October. The seasonally adjusted IHS Markit construction PMI index rose to 50.8 in October from 48.1 in September. But the latest reading was weaker than the post-crisis trend and hinted at just a marginal rise in overall construction output.

Commercial building dropped for the fourth consecutive month in October, which survey respondents attributed to worries about the U.K. economic outlook and subsequent delays to decision-making among clients. Civil engineering was the worst performing sub-category, which some companies citing a lack of big ticket infrastructure projects to replace completed contracts.

A strong rise in residential building work supported the slight rebound in overall construction output in October. The latest rise in housing activity was more rapid than in September, but is still weak in comparison to the average for 2017 to date. Data for the month of October pointed to a marginal rise in new work throughout the construction sector, thereby ending a three-month period of decline. But the pace of new order growth stayed subdued than recorded from mid-2013 to early 2016.

The index gauging construction companies’ expectations for business activity in the year ahead hinted that optimism dropped to a 58-month low in October. Anecdotal evidence widely attributed the fall in sentiment to worries about U.K. economic prospects and lack of new projects in the pipeline. Therefore, job creation continued to be weak in October, while input buying rose just marginally. Intense supply chain pressures were seen again in October, driven by low stocks and restrained capacity among vendors.

Some companies saw that a rebound in demand for construction products throughout the euro area had added to cost pressures, along with the subdued sterling exchange rate. Input prices rose sharply, but the pace of inflation continued to be weaker than the near six-year peak witnessed at the beginning of the year.

At 14:00 GMT the FxWirePro's Hourly Strength Index of British Pound was highly bullish at -134.583, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -12.1601. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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