U.K. construction PMI edges higher in October, business confidence drops

Construction sector of the United Kingdom edged slightly higher during the month of October, led by another solid increase in residential work New order volumes also picked up across the construction sector, but the rate of growth eased since September and remained weaker than seen prior to this summer. This contributed to a drop in business confidence regarding the year-ahead growth outlook, with the latest reading the second-lowest since May 2013.

At 52.6 in October, the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI ) edged up from 52.3 in September and remained above the 50.0 no-change threshold for the  second month running. The latest reading pointed to the fastest upturn in activity since March, although the rate of growth was only modest and still much softer than the average since the recovery began three-and-a-half years ago (57.3).

Housing activity remained the key growth driver across the construction sector in October. Latest data signaled a solid increase in residential building work, and the pace of expansion was only slightly weaker than September’s eight-month peak.

There was also stabilization in commercial construction activity during October, while civil engineering decreased slightly and was the weakest performing broad category of activity. Meanwhile, a number of survey respondents cited the impact of Brexit uncertainty on investor sentiment, alongside reduced confidence towards the general economic outlook.

"A sharp pace of input price inflation added to construction firms’ anxieties about the year-ahead business outlook, with higher costs overwhelmingly linked to supplier price hikes in response to the weak pound," said Tim Moore, Senior Economist, IHS Markit.