UK Construction Bounces Higher, But It’s Only Making Up For Q2 - Forex News by FX Leaders
Construction is recovering well

UK Construction Bounces Higher, But It’s Only Making Up For Q2

Posted Thursday, August 6, 2020 by
Skerdian Meta • 2 min read

During the lock-down months, the manufacturing and particularly the service sectors went through a deep contraction. Although, the deepest contraction was in construction, with activity falling considerably and the PMI indicator declining to just 8 points. But, it bounced back in June and it bounced even higher in July, as today’s report showed. Below is the construction report for July, as well as the commentary from the surveying firm Markit:

UK July Construction Report

  • July construction PMI 58.1 vs 57.0 expected
  • June construction PMI 55.3
Construction activity is seen picking up further in July, mirroring the rebound seen in the manufacturing and services sector amid the easing of lockdown measures. The growth is largely led by homebuilding, but the report highlights considerable risks with regards to employment conditions – the pace of job losses was quicker than in June.
Once again, that puts a lot of emphasis on labour market conditions in the coming months and how that will hold up. A further deterioration in employment down the road will dampen any prospects of a sustained and quick recovery in the UK economy.
Markit notes that:

“Construction companies took another stride along the path to recovery in July as a rebound in house building helped to deliver the strongest overall growth across the sector for nearly five years. Civil engineering and commercial activity are also back in expansion, which has been mainly due to the restart of work that had been delayed during the second quarter of 2020.

“Survey respondents noted a boost to sales from easing lockdown measures across the UK economy and reduced anxiety about starting new projects. However, new work was still relatively thin on the ground, especially outside of residential work, with order book growth much weaker than the rebound in construction output volumes.

Concerns about the pipeline of new work across the construction sector and intense pressure on margins go a long way to explain the sharp and accelerated fall in employment numbers reported during July. This shortfall of demand was mirrored by the fastest rise in sub-contractor availability since

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About the author

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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