U.K. construction sector records weak conditions in February

U.K. construction sector saw subdued conditions in February. The season adjusted IHS Markit construction PMI index rose to 51.4 from January’s four-month low of 50.2. This hinted at a marginal rise in construction output in February, with the index also weaker than seen on average in 2017.

Civil engineering was the worst performing category of construction work, with activity falling at the sharpest rate for five months. A weak patch for house building continued in February, signifying that residential work continued to be on track for its most subdued quarter since the third quarter of 2016. The main bright spot was a strong upturn in commercial construction, which grew at the most rapid pace since May 2017.

New business volumes dropped in February, although the pace of drop was just marginal and a bit slower than seen at the beginning of the year. Survey respondents cited weak client sentiment, a headwind from political uncertainty and a continued lack of tender opportunities to replace completed work on infrastructure projects.

Soft business activity growth and lower new order volumes were a drag on input buying in February. Relatively weak demand for construction materials aided in easing some of the pressure on supply chains, with the latest downturn in vendor performance the least marked since September 2016.

Input cost inflation continued to be solid in February, driven by higher prices paid for a range of raw materials. Survey respondents noted that increased fuel costs and greater staff wages had pushed up operating expenses. But the overall pace of input cost inflation was much weaker than the five-and-a-half year peak seen at the beginning of 2017.

Construction firms showed that business sentiment moderated since January and was at one of the lowest levels witnessed in the last five years. Some companies saw that resilient U.K. economic conditions had underpinned optimism. But there were also reports that Brexit-related uncertainty continued to influence decision making and act as a drag on the demand outlook.

At 18:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -44.3284, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 18.4526. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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