Construction PMI hits eight-month high thanks to housebuilding

The UK construction sector activity has hit a new eight-month high, thanks to the housebuilding sector, according to Markit's purchasing managers' index (PMI) reading for September. Beating analyst expectations of a 63.5 reading, PMI climbed to 64.2, up 0.2 points from August. A reading above 50 signals growth.

Markit attributed the upturn to house building, but noted that once again construction firms reported rapid growth of commercial activity and civil engineering, indicating an increased level of investment in office space, industrial units, retail space and infrastructure.

Markit's chief economist Chris William said: "After the manufacturing PMI signalled a disappointing slowing of factory growth in September, a near-record increase in activity registered by the construction PMI provides more encouraging news on the health of the UK economy at the end of the third quarter."

The average reading for the third quarter was 63.5, compared to 61.1 in the second.

"Although only representing around 6-7% of gross domestic product (GDP), the sheer pace of expansion signalled by the PMI suggests that the construction sector can provide a meaningful boost to economic growth in the third quarter," William continued.

However, Markit also noted that economic growth may slow in the second half of the year, according to levels of optimism amongst construction firms in relation to the outlook.

Levels have fallen to their lowest for nearly a year, hit by concerns over a slowing housing market, shortages of both skilled labour and suitable sub-contractors, higher interest rates and a general weakening of growth in the wider economy.

"Combined with the weakening picture from manufacturing, this downturn in construction firms' optimism may mean the second quarter GDP expansion of 0.9% could represent a peak in the pace of economic growth this year," William explained.

"We await [Friday's] services PMI numbers to get better steer on the economy's growth in the third quarter, though data available so far point to an expansion in the region of 0.7-0.8%."

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Construction PMI hits eight-month high thanks to housebuilding