Wednesday, January 4, 2017
The British construction sector is shrugging off Brexit
Britain's construction sector expanded for a fourth consecutive month in December, continuing to shake off the recession that plagued the sector in early 2016, according to the latest data released by IHS Markit on Wednesday morning.
IHS Markit and CIPS' latest PMI release for the construction sector — which measures expectations of growth — came in at 54.2 for the final month of the year.
That was substantially higher than the 52.8 reading in November, which was the same as the flash estimate for December.
The purchasing managers index (PMI) figures from IHS Markit are given as a number between 0 and 100.
Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the number is, the better things look for the UK.
"UK construction companies signalled a positive end to the year, led by the fastest rise in new order volumes since January 2016. Stronger demand patterns resulted in sustained job creation and a broad-based upturn in business activity during December," a release from IHS Markit said.
Construction PMIs collapsed in the immediate aftermath of the UK's vote to leave the European Union, but as the dust settled the ship steadied somewhat in August, before returning to growth in September, shocking economists. That expansion continued throughout the fourth quarter, and the recovery is now seemingly in full swing.
Here is the chart, showing December's move upwards:
Speaking about the results, Tim Moore, a senior economist at IHS Markit said:
"December’s survey data confirmed a solid rebound in UK construction output during the final quarter of 2016. All three main areas of construction activity have started to recover from last summer’s soft patch, but in each case growth remains much weaker than the cyclical peaks seen in 2014.
"Housebuilding remains a key engine of growth for the construction sector, with the latest upturn the fastest for almost one year."
It is worth noting that while it is widely respected, IHS Markit's PMI is not a hard data point, but it does suggest a solid recovery from 2016's construction recession is building, despite the economic uncertainty caused by Brexit.
Last August, official numbers from the ONS showed that the British construction industry, the sector of the economy that makes sure we have got roofs over our heads and offices to work in, slipped into recession during the first six months of 2016. Construction output dropped by 2.2% year-on-year in June, following on from a 1.6% y-o-y fall in May.
The construction PMI follows on from an incredibly strong manufacturing release on Tuesday, which showed a reading of 56.1, up from an expected 53.0.