UK construction activity accelerated in October

UK construction activity accelerated in October to 7-month high. The housing construction recorded growth, but growth in new orders slowed, while the rising prices of building materials worsened the attitudes about the future. The Purchasing Managers’ Index (PMI) rose unexpectedly from 52.3 points in September to 52.6 points in October, while the economists had forecast a drop to 51.8 points.

The results showed that the British economy retains momentum after the Brexit referendum in the end of June. However, weaker growth in new orders and a sharp increase in costs suggest that next year will be more difficult. The pressure over the construction sector continued to decline in October, but it would be premature to draw conclusions that the industry is on track to recovery

The companies are shrinking their investment spending because of the uncertainty surrounding the potential exit of the country from the European Union. The business expectations for the coming year have become significantly more gloomy, amid soaring materials whose prices grow at the second fastest pace since 2011.

The collapse in the exchange rate of the British pound probably will push the Bank of England (BoE) to raise its forecast for inflation at its meeting on Thursday.

The housing construction generates the bulk of activity in the sector, while the civil engineering and construction business largely stagnate.

The preliminary official data on the growth of the British economy in Q3 2016 show that the construction sector has shrunk by 1.4% despite higher than expected GDP growth of 0.5%.

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