Optimism in UK construction returns to pre-referendum levels

Economy watchers received a boost on Wednesday when a volley of economic numbers showed the UK economy remaining on a solid footing into the end of the fourth quarter. The morning’s data confounded economist expectations once again, the source this time being the construction industry PMI, which rose to levels not seen since before the referendum in June.

It comes just a day after optimism in the manufacturing sector reached a three and a half year high, according to data from the same survey compiler.

The UK construction PMI came in significantly above forecasts when the index rose to 54.2 in December, up from 52.8 in November, and against economist expectations for a fall to 52.6.

The PMI, which effectively measures optimism among purchasing managers, was boosted by an exceptional performance from residential construction although all areas of the industry performed well during the month.

“The residential sector raced ahead this month, with the fastest pace of growth since January 2016. Strong pipelines of new work were reported across all sub-sectors, and construction firms showed improved confidence after the impacts of uncertainty around the EU referendum,” said David Noble, CEO at the Chartered Institute of Procurement & Supply.

The construction industry data was followed by numbers from the Bank of England that showed mortgage lending increasing at a healthy pace during November while consumer demand for credit also remained robust, which could bode well for the pace of overall economic growth in the final quarter of last year.

Both sets of data were well received by markets on Wednesday, with sterling gaining nearly 100 points against the US dollar to trade back above the 1.2300 handle, while the FTSE 100 closed at a new high thanks to a rally among house building stocks.

All eyes have now reverted to the services sector, which is responsible for the lion’s share of economic output in the UK, for which the latest reading of the proverbial pulse is due out at 0930 on Thursday.

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