Two surveys from Markit/CIPS show fears of recession fading. The UK construction industry showed signs of recovery in August, contracting less than in July, a survey has suggested.
The Markit/CIPS Purchasing Managers’ Index (PMI) for the sector rose to 49.2 in August, but stayed below the 50 level, which indicates contraction.
The index was up from July’s figure of 45.9, its lowest for seven years. However, the Brexit vote was still the main factor weighing on activity, the report said.
Tim Moore, senior economist at Markit, said: “Construction firms cited a nascent recovery in client confidence since the EU referendum result and a relatively steady flow of invitations to tender in August.
“Construction firms cited a nascent recovery in client confidence since the EU referendum result and a relatively steady flow of invitations to tender in August.”
Tim Moore, senior economist, Markit
“However, the latest survey indicates only a partial move towards stabilisation, rather than a return to business as usual across the construction sector.
“There were still widespread reports that Brexit uncertainty had dampened demand and slowed progress on planned developments, especially in relation to large projects.”
David Noble, group chief executive at the Chartered Institute of Procurement & Supply, added that the weak pound had pushed up purchasing costs for the sector “at a rate not seen for half a decade”.
“Firms reduced their purchasing volumes as a result, as new orders and activity continued to fall – though at a more moderate rate compared to last month,” he added.
Meanwhile, the UK’s dominant services industry rebounded sharply in August. Activity in UK services recorded its largest month-on-month rise in the Markit/CIPS PMI survey’s history.
The index rose from 47.4 in July to 52.9 in August. A score above 50 indicates expansion.
It adds to recoveries in manufacturing and construction to suggest “recession will be avoided”, Markit said.
The pound rose sharply after the report was released, jumping 0.6% against the dollar to $1.3366.
Chris Williamson, chief business economist at Markit, said it remained too early to say whether August’s upturn was the “start of a sustained post-shock recovery, but there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate”.
He added: “Many companies are seeing business return to normal either simply by customer confidence rising or a stoic determination to ‘buck Brexit’ and carry on regardless.”
The UK services industry, which includes financial services through to cafes and shops, accounts for about 80% of the UK economy.
