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UK Construction Goes Back Into Expansion

The construction activity has been in contraction during most of last year in the UK, as the PMI indicator has shown. It surfaced briefly in February just before the coronavirus, but it dived back down in March, while in April it fell to the lowest levels on record, at 8 points. It improved somewhat in May, but remained in deep contraction and was expected to remain there in June as well. This report though, was pretty upbeat, as shown below:

UK June Construction Report

  • June construction PMI 55.3 points vs 46.0 expected
  • May construction PMI 28 points
That is a decent rebound in construction activity as the economic reopening gathers pace, with new orders even seen stabilizing after three months of sharp decline. Of note, commercial and civil engineering work also returned to growth last month, following that of residential activity so that is a positive takeaway. That said, a sustained return to pre-virus conditions will be the real challenge moving forward and we’ll see if that can be achieved in the coming months.
Markit notes that:

“June’s survey data revealed a steep rebound in UK construction output as more sites began to reopen and the supply chain kicked into gear. House building led the way with the fastest rise in activity for nearly five years, while commercial and civil engineering also joined in the recovery from the low point seen in April.

“As the first major part of the UK economy to begin a phased return to work, the strong rebound in construction activity provides hope to other sectors that have suffered through the lockdown period. While it has taken time for the construction supply chain to adapt and rebuild capacity after widespread business closures, there is now clear evidence that a return to growth has been achieved.

“While some survey respondents commented on cautious optimism about their near-term prospects, construction companies continued to face challenges securing new work against an unfavourable economic backdrop and a lost period for tender opportunities. At the same time, operating expenses are rising due to constrained capacity across the supply chain and the impact of social distancing measures.

“Looking ahead, construction firms are more confident than at any time since the start of the COVID-19 pandemic. However, the ongoing reductions in staffing numbers seen in June provide a stark reminder that underlying conditions across the sector are a long way off returning to those seen before the public health emergency.”

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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