U.K. construction sector records deceleration in output growth in August, PMI index falls to 52.9

The U.K. construction sector recorded renewed deceleration in output growth, with all three categories of activity seeing a loss of momentum since the previous month. The seasonally adjusted Construction PMI index fell to 52.9 in August from July’s 14-month peak of 55.8. The latest reading hints at a moderate overall growth in construction output, with the pace of growth the weakest since May.

Commercial building was the best performance area of construction output in August, followed closely by residential work. Nevertheless, the latest growth of housing activity was the softest since March. In the meantime, work on civil engineering projects fell for the first time in five months. A number of survey respondents cited a lack of new work on infrastructure projects.

Mirroring the trend for construction output, the data released today showed a deceleration in new business growth from July’s 14-month peak. Anecdotal evidence citied resilient client demand and supportive economic conditions, but there were also reports that Brexit-related uncertainty continued to hold back investment spending. Higher overall workloads encouraged additional staff recruitment throughout the construction sector in August. Survey respondents noted tight labor market conditions and shortages of suitably skilled candidates to fill vacancies.

Purchasing activity rose for the 11th straight month in August, although the latest upturn was the softest since March. Low stock and labor shortages among suppliers continued to impact on delivery times for construction products and materials. The latest deterioration in supplier performance was the greatest seen for nearly three-and-a-half years. In spite of stretched supply chains and rising energy-related costs, latest data showed that input price inflation slowed to its lowest since July 2016.

Construction firms in the U.K. are optimistic that business activity will expand in the coming 12 months, but the degree of sentiment slowed to its weakest since May. Survey respondents cited confidence about achieving organic growth through new project wins and geographical diversification, while Brexit uncertainty continued to be the main factor cited as holding back sentiment.

At 14:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -40.5637, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 139.875. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex