UK Construction Improves, While Eurozone Constructions Remains in Recession
Skerdian Meta • 2 min read
The UK economy has been weakening in the last three months, after it rebounded in summer, following the flash crash in spring, during the lockdowns. However, it is holding up much better than in Europe, as most sectors remain in expansion, while in Europe, services and construction have fallen into a deep recession again.
Today’s construction reports from the UK and Germany show the difference, with the activity expanding in Britain in November, while this sector remains deep in contraction in Germany. If it wasn’t for the Brexit process, the EUR/GBP would be on a strong bearish trend, but forex trading is not that straightforward nowadays, especially with everything that has been going on this year.
UK November Construction Report
- November construction PMI 54.7 vs 52.0 expected
- October construction was PMI 53.1 points
UK construction activity surprised to the upside last month, as new order growth saw its fastest rise since October 2014. Home-building remains the best-performing sub-sector, while civil engineering work also resumed growth in November.
The rebound after the drop in October is at least a minor positive signal for the UK economy. Markit notes that:
“UK construction output stayed on a recovery path in November and there were signs that the main growth driver has transitioned from catch-up work to new projects. The latest increase in new orders was the strongest since late-2014, with construction firms reporting a boost from rising client confidence and the release of budgets that had been held back earlier in the pandemic.
“House building was once again the stand-out performer, while a return to growth for civil engineering contributed to the rise in the headline PMI during November. Commercial construction lagged behind the recovery seen elsewhere in the sector, amid subdued demand for office space, retail developments and other corporate projects hit by the pandemic.
“Supply chain challenges remain on the horizon, as signalled by another sharp lengthening of lead times for construction products and materials. Transport delays and low stocks among suppliers were reported by construction firms in November, which led to the fastest increase in purchasing costs in over one-and-a-half years.”
German November Construction Report
- November construction PMI 45.6 points vs 45.2 prior
- October construction PMI was 45.2 points
The downturn in construction activity continues, albeit at a slower pace, but the bright side is that since the start of the pandemic, construction companies have been the least pessimistic in terms of the industry outlook.