MNI: UK Oct Construction PMI Resurgent; Outlook Bleak

--CIPS/IHS Markit UK Construction PMI 53.2 in Oct vs 52.1 in Sep

By Jai Lakhani

     LONDON (MNI) - The UK CIPS/IHS Markit construction sector PMI rose to 53.2

in October from 52.1 in September, a whole 1.2 points above the MNI median of

52.0.

     However, the CIPS new business volumes were concerning and pointed to a

slower rise. The rate of new contract growth was the weakest in the current five

month expansion streak and some anecdotal evidence pointed to intense

competition in the market as well as delayed decision making from clients. 

     It was unsurprising that in response to weak new order growth, firms'

expectations for future growth receded to a near six-year low. The future growth

expectations were impeded by Brexit uncertainty.  

     Driving the growth out of the three broad categories was civil engineering

after it declined in both August and September. Activity rose at the strongest

pace since July 2017. Whilst house building and commercial construction both

increased at solid rates, they were at seven and five month lows respectively. 

     Civil engineering was the best performing segment for the first time since

January. 

     A more troubling result was that the survey found a decrease in new orders

being matched with delivery times for construction products and materials

continuing to lengthen markedly in October despite this. 

     --COST PRESSURES REMAIN ELEVATED

     Despite the rate of input inflation easing to a 27-month low, cost pressure

in the sector remained strong. Driving cost pressures were fuel, labour, timber

and steel costs. Sub-contractor rates also increased at a relatively strong

pace. 

     -- FUTURE CONTINUES TO LOOK GLOOMY

     The headline October construction PMI points to a sector snapping back from

a low base. However, the picture for the future is one for concern. 

     "Although total UK construction activity rose at a stronger pace in

October, the underlying survey data paint a less rosy picture for the sector

towards the end of the year... Construction companies again linked uncertainty

to Brexit negotiations, which influenced delays to final decisions at clients,"

said Trevor Balchin, Economics Director at IHS Markit. 

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

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