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UK CommentBad weather hit construction PMI in March

  1. PMI dropped to 47.0 in March from 51.4 in February; largest fall since June 2016
  2. New orders and activity fell, while employment and future expectations provided support
  3. Bad weather aside, underlying momentum still seems very weak
PMI fell to 47.0 in March from 51.4 in February; largest drop since June 2016
UK construction PMI fell to 47.0 in March from 51.4 in February, which was lower than the consensus of 51.0. The drop in March was the largest in the headline sentiment index since June 2016; however, unusually bad weather in March was largely to blame.
New orders and activity fell, while employment and future expectations provided support
A drop in business activity and new orders weighed on sentiment, while employment and future business expectations provided support. Business contacts indicated that bad weather and snow-related disruptions were a key factor behind the drop in construction output, and civil engineering projects were particularly affected. According to the survey, the drop in civil engineering work was the sharpest in five years. Commercial activity also decreased during March, with the rate of decline the most marked since September 2017. Housing bucked the wider trend for construction activity in March, although the latest upturn in residential building was only marginal. New orders fell at their sharpest rate since July 2016. Survey respondents noted that subdued underlying demand and, in some cases, weather-related disruption affected sales in March. However, business respondents expected activity to improve and employment growth accelerated to a three-month high.
Bad weather aside, underlying momentum still seems very weak
Even though much of the weakness in construction sentiment in March was weather-related, underlying demand remained constrained by heightened economic uncertainty and risk aversion among clients, according to the survey. Based on past form, construction sentiment continues to indicate that momentum in the sector is very weak, and even disregarding the very weak reading in March, the trend in sentiment does not seem to suggest output growth rates much above zero.

 


Source: Macrobond

 


Source: Macrobond


Source: Macrobond Disclaimer

Kari Due-Andresen

Chief Economist Norway

Norway and UK

kadu01@handelsbanken.no

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