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Construction activity shows recovery in August as downturn slows

Construction activity showed signs of recovery in August, with the industry reporting its slowest pace of decline since June’s EU referendum.

The Markit / CIPS Construction PMI for August stood at 49.2, up from the previous month’s seven-year low of 45.9.

However, activity is still declining, albeit at a much slower rate, with the index still below the 50.0 ‘no change’ mark.

New orders in construction also showed signs of stabilisation, and are now declining at their slowest rate since May, while the housing and commercial sectors both saw much slower reductions in activity compared with a month earlier.

Civil engineering activity was flat after reporting a decline in July.

Firms were also more bullish about the future in August than the previous month, with more companies reporting a rebound in business confidence compared with July’s 39-month low.

The survey’s business confidence rating, while remaining below the three-year average, is now at its highest point since May.

Staffing levels saw a marginal increase month on month, with a renewed rise in employment numbers – tallying with Office for National Statistics data that recorded a 2 per cent increase in construction employment in Q2 2016.

At the same time, price inflation and input costs reached their highest level since July 2011, with respondents to the survey pointing to exchange rate depreciation as the main culprit.

Markit senior economist Tim Moore said construction firms had reported “a relatively steady flow of invitations to tender” in August, with the industry’s recovery helped by a “much slower decline” in the commercial sector.

However, he warned that the latest results were only “a partial move towards stabilisation”, rather than a return to “business as usual”.

“There were still widespread reports that Brexit uncertainty had dampened demand and slowed progress on planned developments, especially in relation to large projects,” he said.

The latest figures from the ONS pointed to construction being in recession in the first two quarters of the year.

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