The latest Markit survey has revealed moderate stability returned to the construction industry in August, despite seeing a contraction in growth
It has been a difficult period for the construction sector. The Markit and CIPS Purchasing Managers Index (PMI) revealed just how bad things had become last month, after the PMI reading for July hit 45.9. A reading below 50 indicates contraction in the sector.
While August saw a little growth, reaching a reading of 49.2, the figure still shows the sector in is not growing.
This latest reading revealed the industry fell for its third consecutive month, but August’s figure surpassed the forecast of 46.3, which was given by economists
Markit said the falling pound was causing difficulties for construction, increasing input costs at its fastest pace in five years as imported materials cost the private sector more.
Furthermore, uncertainty caused by the referendum vote also caused some construction firms to experience a slowdown in activity.
However, the survey also showed evidence of increasing confidence among clients from the 39-month low seen in July.
Senior economist at Markit Tim Moore said firms were undergoing a “nascent recovery” in confidence and said there was “hope that the near-term fallout from Brexit uncertainty will prove less severe than feared”.
“The downturn in UK construction activity has eased considerably since July, primarily helped by a much slower decline in commercial building.
“Construction firms cited a nascent recovery in client confidence since the EU referendum result and a relatively steady flow of invitations to tender in August.”
Chris Williamson at Markit said: “Cut through the noise and volatility of the past few months and the overall picture is one of the construction sector in a moderate downturn, and its disappointing performance so far in 2016 is a far cry from the solid growth seen throughout much of the prior three years.”
Mike Chappell, of Lloyds Bank commercial banking, said: “The past month has seen a number of the bigger players in the sector report robust results with a relatively upbeat outlook, suggesting there may have been less negative impact from the EU referendum result than was originally feared, at least at the top of the market.
“The order books of larger firms, many of which benefit from diversified revenue streams, appear to be in good shape, while several have either increased or restored their dividends.
“That said, anecdotal evidence indicates those further down the chain – such as mid-tier contractors and SMEs – are less bullish and more likely to adopt a ‘wait and see’ approach.”