UK construction data alone not suffice for Q2 growth, PMI and BoE notes weigh further

UK Construction: Despite construction activity increases by 3.9% in March, over the quarter, output was reported to have contracted by 1.1%. But it should be gauged on the basis of construction output data for April which will present additional insight into the prospects for Q2 GDP.

The estimates of monthly construction output are often heavily revised and survey-based sectoral indicators such as the PMI and BoE Agents' scores indicate some scope for an official reassessment of activity in Q1.

With survey evidence remaining resilient, we consider the near-term outlook for activities in the sector to remain broadly firm, although for April, some retracement from the robust March outturn looks on the cards. As such, we forecast output to have dipped by 1.0% in April.

Nevertheless, with reticent surge in gains expected over the remainder of the Q2, construction seems likely to provide a positive contribution to overall output growth in Q2, consistent with a firming in the pace of overall GDP growth.

Thus, we believe, the UK following the better than projected IP data earlier this week which suggested that activity started the Q2 on a solid footing but April's construction numbers as deciding factor. If any deviations from here, economy is likely to disappoint investors.