UK PMI: Construction activity rebounded more than expected in September

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The UK’s construction sector unexpectedly picked up speed in September, helped by a post-lockdown bounce in the housing market, according to survey data.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index accelerated to 56.8 from 54.6 in August – well above the 50-point measure that separates expansion from contraction.

The reading was above all forecasts in a Reuters poll of economists, which had pointed to a slight slowing in the sector.

“UK construction took off in September, soaring ahead of both the manufacturing and service sectors in terms of output growth and recording the fastest rise in purchasing activity since October 2015,” said Duncan Brock, director of the Chartered Institute of Procurement & Supply.

Construction firms continued to cut jobs in September, the survey showed, albeit at a slower pace than the previous month.

The sector also reported the quickest rise in new business since before lockdown, with companies increasing purchasing activity at the quickest pace in almost five years.

Increases in activity in home-building  — which reported the fourth sharp monthly increase in a row — and in commercial construction more than offset a fall in civil engineering work last month.

Britain’s housing market has boomed since coronavirus restrictions were lifted in May, driven by cuts to stamp duty, pent-up demand from when the market was frozen, and demand for more spacious homes following the Covid-19  lockdown.

Some industry officials have warned that the housing market recovery is likely to run out of steam, with unemployment likely to rise sharply as the government pares back its job support programmes next month.

“Government support schemes are winding down, so the bigger worry remains levels of job creation. With another drop in employment numbers, vacancies were sparse and further redundancy schemes could be on the cards once this pent-up demand for work is satisfied,” said Brock.

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