UK construction PMI jumps to 48.4 in January, GBP/USD re-takes 1.3000

The construction sector activity in the UK improved dramatically last month, the latest survey report from Markit Economics showed this Tuesday.

The final Purchasing Managers' Index (PMI) came in at 48.4 in January, up from 44.4 recorded in December and beat the consensus estimates pointing to a reading of 46.6 by a big margin.

Key Points:

New orders close to stabilization in January.

Construction firms report a boost from receding political uncertainty.

Business optimism rebounds to its highest since April 2018.

Tim Moore, Economics Associate Director at IHS Markit, noted:

“The construction sector downturn lost intensity in January amid slower reductions in house building, commercial work and civil engineering activity. Measured overall, the latest dip in construction output was much shallower than in December, with survey respondents often commenting on improved willingness to spend among clients since the general election.”

“Commercial work dropped at the slowest pace since the start of 2019 and was the main beneficiary of receding political uncertainty. UK construction companies also commented on signs of a turnaround in demand conditions across the residential development category during January. Civil engineering remained the weakest performing area of construction work as firms across the supply chain cited a lack of opportunities to replace completed contracts.”

FX Implications:

The upbeat data fails to offer a fresh boost to the GBP bulls, as GBP/USD keeps the recovery mode intact around the 1.30 handle.