Green shoots in UK construction sector, PMI beats expectations

Britain's construction sector is beginning to see the shoots of a recovery. IHS Markit and CIPS' latest PMI released earlier on Tuesday showed that the final Purchasing Managers' Index (PMI) in the UK jumped to 52.3 points in September, substantially above 49.2 in the previous month. The data surprised economists who had forecasted a reading of 49.0.

Construction PMIs collapsed in the immediate aftermath of the UK's vote to leave the European Union has now returned to growth for the first time in four months. The construction sector activity extended its rebound from seven-year lows and surprised markets.

Solid rebound in residential activity which boosted overall construction output was seen as the main driver behind the push. New orders also rebounded, ending a four-month period of sustained decline. The pick-up in orders in September supports hopes that activity will keep growing.

"The sector still faces challenges with continuing pressures on input prices resulting from the weaker pound and the lingering uncertainty of the Brexit process and how it will impact on future business.” said David Noble, Group Chief Executive Officer at CIPS.

Chancellor Philip Hammond is prioritizing house-building initiatives as he looks to support the economy as the Brexit process gets underway. On Monday Hammond announced that he will prioritize spending on new homes. Hammond said the government will set aside around £2bn to create a new ‘Accelerated Construction’ scheme to fund the building of up to 15,00 new homes by the end of the current parliament in 2020.