U.K. construction output growth slows slightly in December

Construction firms in the U.K. indicated an uneven rebound in business activity in December. The seasonally adjusted IHS Markit U.K. Construction PMI index dropped to 52.2 in December from November’s 53.1. However, it is above the 50 no change threshold for the third straight month. Therefore, the latest reading hinted at a moderate growth of overall construction output at the end of 2017.

Survey respondents pointed that house building continued to be the main driver of growth, with residential work rising for the 16th straight month in December. On the contrary, the latest data showed a moderate drop in commercial construction, thereby continuing the downward trend seen since July. Civil engineering work stabilized in the latest survey period, which ended a three-month period of decline.

December data indicated towards resilient demand for new construction projects, as emphasized by the most rapid upturn in new order volumes since May. Anecdotal evidence cited an improved flow of enquiries in recent months, along with a gradual upturn in clients’ willingness to commit to new work. The prospect of greater workloads ahead led to stronger rises in employment and purchasing activity in December. The latest upturn in input buying was the steepest for two years, which survey respondents greatly attributed to increased business requirements.  Strong demand for construction products and materials added to another sharp lengthening of suppliers’ delivery times during the end of 2017.

Solid cost pressures persistent throughout the construction sector, stimulated by rising prices for a range of inputs. Especially, survey respondents noted higher prices for blocs, insulation, bricks and roof tiles, along with continued rises in the cost of imported products.

Even if the rate of input cost inflation has risen since November, it continued to be weaker than February’s peak. In spite of recovery in new order volumes in December, construction companies showed a subdued degree of positivity about the business outlook for the next 12 months.  The balance of firms anticipating a rise in output levels continued to be among the weakest recorded since mid-2013, which survey respondents mainly attributed to concerns about the wider U.K. economic outlook.

At 16:00 GMT the FxWirePro's Hourly Strength Index of British Pound was bearish at -89.4039, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -33.7011. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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