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British Construction Industry Powers Down after Bumper Year

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Published on : Jan 05, 2015

2014 was an intriguing year for the British real estate market. The last quarter of the year saw consistent drops in the construction industry’s PMI rating, resting on 57.6 in December from 59.4 in November. Any reading above 50 is considered expansion, so it may be a bit early to get worried about the industry, but a rating of 57.6 is still way below the analysts’ forecast of 59. December 2014 also reported the lowest increase in output since July one year earlier, according to Markit’s findings.

The shining light in the gloom was the strong performance of the residential estate building sector, as Britain’s builders enjoyed the best year since the millennial moment. Commercial construction also enjoyed a rise, although it still dropped from November. In the words of Markit’s senior economist Tim Moore, “Over the course of 2014, UK construction firms recorded the strongest calendar year of residential building since the survey began in 1997. Four times as many construction companies anticipate an upturn in output over the year ahead as those that expect a reduction.”

Moore’s words signal that the positive trend in residential and commercial real estate will carry through in 2015. The construction industry has posted a 50+ PMI for 20 consecutive months, signaling the recent slump is more likely to be a blimp than a worrying trend with long-lasting consequences.

The fall of the oil prices in late 2014 also contributed to the general positive prognosis, as it helped keep inflation down within the construction industry.

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