Construction industry shrugs off post-Brexit vote slump

Latest News Wed, Oct 5, 2016 9:11 AM

Britain's construction industry unexpectedly returned to growth in September, according to a survey that will add to doubts whether the Bank of England will ready more stimulus to offset the hit of June's Brexit vote.

The Markit/CIPS UK Construction Purchasing Managers' Index (PMI) rose to 52.3 from 49.2 in August, beating all forecasts in a Reuters poll and rising above the 50 mark that divides growth from contraction for the first time since May.

Housebuilding recovered and new orders picked up, pushing the headline index to a six-month high, although it was still well below the average over the last three years of around 60.

The construction industry's surprise bounce back follows Monday's strong manufacturing PMI, adding to signs the economy has fared better than policymakers had feared since the June 23 vote to leave the European Union.

"Construction firms appear reasonably optimistic about the near-term outlook, with confidence linked to the fastest rise in new orders since March," said Tim Moore, economist at survey compiler IHS Markit.

"However, the sector remains on a much weaker growth trajectory than seen at the start of 2016," Moore said, citing subdued investment and accelerating prices paid by construction firms for raw materials due to the weak pound.

Residential and civil engineering activity expanded in September but commercial construction shrank for a fourth month, marking its longest decline since early 2013.

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