Britain’s beleagured builders unexpectedly returned to growth in September, according to the latest survey snapshot of the construction industry.
The Markit/CIPS Purchasing Managers’ Index (PMI) jumped to 52.3 in the month, up from 49.2 in August and rising from a seven-year low of 45.9 in the immediate wake of the 23 June Brexit referendum vote.
Any PMI reading above 50 indicates expansion. City of London analysts had pencilled in a reading of just 49.
The improvement was attributed to a recovery in residential building activity. Civil engineering was also up, although commercial construction activity continued to decline, though at a more modest pace.
Tim Moore of IHS Markit said that a number of respondents said Brexit-related anxiety had receded among clients. Around 45 per cent of the firms surveyed expected output to rise in the year ahead, while only 9 per cent anticipated a decline.
“After a few challenging months following the UK’s decision to leave the EU, today’s construction PMI provides a clear indication that the clouds of uncertainty are finally lifting as the construction industry gets back to business,” said Mark Robinson of the Scape Group.
The reading follows a much better than expected PMI manufacturing survey for September released yesterday.
The services PMI for the survey will be released tomorrow.
Another upside surprise there will further cement the view that the UK has easily avoided a return to recession in the third quarter of the year and will likely diminish expectations of another interest rate cut by the Bank of England at its meeting in November.
The economy expanded by 0.7 per cent in the second quarter of 2016.
A sharp deterioration of the PMI indicators immediately following the Brexit vote had prompted many City analysts to forecast a return to recession for the UK. But the survey indicators have bounced back strongly in August and September and the modest amount of “hard” data from the Office for National Statistics covering the period since June has also been positive.
The Bank of England is currently forecasting that the economy will have grown 0.3 per cent in the third quarter of the year.
What experts have said about Brexit
What experts have said about Brexit
1/11 Chancellor of the Exchequer Philip Hammond
The Chancellor claims London can still be a world financial hub despite Brexit “One of Britain’s great strengths is the ability to offer and aggregate all of the services the global financial services industry needs” “This has not changed as a result of the EU referendum and I will do everything I can to ensure the City of London retains its position as the world’s leading international financial centre.”
2/11 Yanis Varoufakis
Greece's former finance minister compared the UK relations with the EU bloc with a well-known song by the Eagles: “You can check out any time you like, as the Hotel California song says, but you can't really leave. The proof is Theresa May has not even dared to trigger Article 50. It's like Harrison Ford going into Indiana Jones' castle and the path behind him fragmenting. You can get in, but getting out is not at all clear”
3/11 Michael O’Leary
Ryanair boss says UK will be ‘screwed’ by EU in Brexit trade deals: “I have no faith in the politicians in London going on about how ‘the world will want to trade with us’. The world will want to screw you – that's what happens in trade talks,” he said. “They have no interest in giving the UK a deal on trade”
4/11 Tim Martin
JD Wetherspoon's chairman has said claims that the UK would see serious economic consequences from a Brexit vote were "lurid" and wrong: “We were told it would be Armageddon from the OECD, from the IMF, David Cameron, the chancellor and President Obama who were predicting locusts in the fields and tidal waves in the North Sea"
5/11 Mark Carney
Governor of Bank of England is 'serene' about Bank of England's Brexit stance: “I am absolutely serene about the … judgments made both by the MPC and the FPC”
6/11 Christine Lagarde
IMF chief urges quick Brexit to reduce economic uncertainty: “We want to see clarity sooner rather than later because we think that a lack of clarity feeds uncertainty, which itself undermines investment appetites and decision making”
7/11 Inga Beale
Lloyd’s chief executive says Brexit is a major issue: "Clearly the UK's referendum on its EU membership is a major issue for us to deal with and we are now focusing our attention on having in place the plans that will ensure Lloyd's continues trading across Europe”
8/11 Colm Kelleher
President of US bank Morgan Stanley says City of London ‘will suffer’ as result of the EU referendum: “I do believe, and I said prior to the referendum, that the City of London will suffer as result of Brexit. The issue is how much”
9/11 Richard Branson
Virgin founder believes we've lost a THIRD of our value because of Brexit and cancelled a deal worth 3,000 jobs: We're not any worse than anybody else, but I suspect we've lost a third of our value which is dreadful for people in the workplace.' He continued: "We were about to do a very big deal, we cancelled that deal, that would have involved 3,000 jobs, and that’s happening all over the country"
10/11 Barack Obama
US President believes Britain was wrong to vote to leave the EU: "It is absolutely true that I believed pre-Brexit vote and continue to believe post-Brexit vote that the world benefited enormously from the United Kingdom's participation in the EU. We are fully supportive of a process that is as little disruptive as possible so that people around the world can continue to benefit from economic growth"
11/11 Kristin Forbes
American economist and an external member of the Monetary Policy Committee of the Bank of England argues that the economy had been “less stormy than many expected” following the shock referendum result: “For now…the economy is experiencing some chop, but no tsunami. The adverse winds could quickly pick up – and merit a stronger policy response. But recently they have shifted to a more favourable direction”
The latest data from the ONS suggests construction output declined by 0.1 per cent in the second quarter of 2016, following an 0.8 per cent expansion in the first three months of the year. The sector accounts for around 6 per cent of GDP
According to the ONS construction output finally returned to its 2008 level earlier this year, although some industry economists question the accuracy of the ONS statistics.
Finally back to 2008 peak?
The sector is set to receive support from Government policy in the coming months.
The Chancellor, Philip Hammond, yesterday pledged an extra £2bn to facilitate construction on public sector land and also signalled that additional public sector investment in infrastructure will be unveiled in the 23 November Autumn Statement.Reuse content