Sharpest rise in UK construction output since August 2007 – Markit

Feb 4 • Mind The Gap • 3196 Views • 2 Comments on Sharpest rise in UK construction output since August 2007 – Markit

shutterstock_153690668Ask many analysts, market commentators and economists which data they trust as a herald of good fortune to come and many will suggest that construction data is “the one” given that it has an incredible pull through effect on the rest of the economy. It works like this; more houses, apartments, commercial buildings and infrastructure projects get built due to bank financing, more highly skilled folk get employed and therefore they have more money to spend in the overall economy.

So it’s always good to see the positive number with regards to the PMI for construction published by Markit this morning, despite our reservations that they’re Pom Pom cheerleaders for the UK economy in particular. However, there appears to be significant amounts of small property developers looking to flip houses for a small profit in the UK at the moment which could be distorting the figures…

Typically they’ll be buying in work; for example, they’ll buy a house, spend thousands on it then attempt to sell it for a much higher price. Let’s hope that this new found construction data is actual spade ready construction projects and not simply chancers looking for a quick buck.

Tim Moore, Markit Economist, said the survey provides reassurance that the UK construction recovery remains on track

The latest data show positive developments on a number of fronts, with job creation rebounding at the start of the year while output and new business growth was the fastest since the summer of 2007. Housing activity growth now stands at its strongest for just over a decade, boosted by growing demand for new homes and improving confidence within the UK property market. Meanwhile, strengthening domestic economic conditions spurred greater spending on commercial projects in January. A sharp rise in civil engineering activity completed an impressive showing from all three sub-categories of construction monitored by the survey.

So the UK posts its sharpest rise in construction since 2007 and Spain rejoices as its unemployment numbers see the smallest increase since 2007. Over the last twelve months unemployment has decreased by 167K in Spain. However, despite our best efforts we struggled to get the actual unemployment number given that the press release from Spain’s official stats department read more like a public relations puff piece than an official statement.

“Is there still over 60% of youths unemployed, is there close on 27% unemployment in the adult population?” Were the two questions we wanted the truth to and eventually we found it after putting the press release through a Google translator…or so we thought. We still couldn’t find the data therefore it’s safe to presume that there’s been no change to the horrific unemployment levels in Spain were nearly 6 out of 10 youths are still jobless.

In other news Jack Lew, the US Treasury secretary, issued an urgent call for Congress to raise the borrowing limit this month, turning up the pressure on Republicans to abandon their ‘politics’ to avoid a new fiscal crisis in America. Mr Lew spoke at the Bipartisan Policy Center and offered a stark warning on the timetable for lawmakers to act on the debt ceiling. The US borrowing limit will be reached on February 7th, triggering “extraordinary” cash management measures at the Treasury that will last only until the end of the month.

Australia’s central bank signaled the end of a two-year easing cycle and foreshadowed stronger economic growth, sending the nation’s currency higher. Governor Glenn Stevens kept the overnight cash-rate target at 2.5 percent, saying in a statement in Sydney; “the most prudent course is likely to be a period of stability in interest rates.” He said the Australian dollar’s decline “will assist in achieving balanced growth.”

Spain: January recorded the smallest increase in unemployment since 2007

Registered unemployment in January grew by 113,097 people from the previous month and the total number of registered offices of the Public Employment Services unemployed stood at 4,814,435. Although January has always increased unemployment, and this month is the smallest increase since 2007. Thus, the Secretary of State for Employment, Engracia Hidalgo, recalled that in the past 5 years, the registered unemployment in January has grown by an average of 152,837 people. During the last twelve months registered unemployment has decreased 166,343 people.

RBA Statement on Monetary Policy

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent. Since the Board’s previous meeting, information on the global economy has been consistent with growth having been a bit below trend in 2013, but with reasonable prospects of a pick-up this year. The United States economy continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth, while China’s growth remains in line with policymakers’ objectives. Commodity prices have declined from their peaks but in historical terms remain high.

Sharpest rise in UK construction output since August 2007

January data indicated that UK construction companies started the year with an acceleration of output growth at their units, boosted by sharp rises in incoming new work. Stronger demand resulted in a marked increase in employment numbers across the construction sector as well as improved confidence about the business outlook for the next 12 months. Adjusted for seasonal factors, the Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) registered 64.6 in January, up from 62.1 in December and above the neutral 50.0 value for the ninth successive month.

Market snapshot at 10:00 am UK time

The ASX 200 closed down 1.75%, the CSI 300 down 1.14%, the Hang Seng down 2.89%, the Nikkei down 4.18% at 14000. Euro STOXX is down 0.17%, CAC up 0.04%%, DAX down 0.72% and FTSE down 0.10%.

The DJIA equity index future is up 0.41%, SPX up 0.56%, NASDAQ up 0.42%. NYMEX WTI oil is up 0.43% at $96.84, NYMEX nat gas is up 2.-0% at $5.05 per therm. COMEX gold is down 0.38% at $1255, with silver on COMEX down 0.42% at $19.33.

Forex focus

The yen was little changed at 100.97 per dollar early in London after touching 100.76, the strongest since Nov. 21st. It traded at 136.63 per euro after climbing to as high as 136.23, a level unseen since Nov. 22nd. The dollar was at $1.3531 per euro after falling 0.3 percent yesterday to $1.3525. The yen touched a two-month high against the dollar and euro before a private U.S. report tomorrow forecast to show a slowdown in job creation that may boost demand for safer assets. The Aussie climbed against all of its 16 major peers, appreciating 1.8 percent to 89.10 U.S. cents.

Bonds briefing

U.S. 10-year notes yielded rose two basis points, or 0.02 percentage point, to 2.60 percent early in London. The 2.75 percent note due in November 2023 fell 5/32, or $1.56 per $1,000 face amount, to 101 11/32. The yield dropped to 2.568 percent yesterday, the lowest since Nov. 1st.

Japan’s 20-year borrowing cost fell to as low as 1.42 percent, a level not seen since April. Australia’s 10-year yield reached 3.93 percent, the least since October, while the central bank finished a meeting today by leaving its benchmark interest rate at a record low of 2.5 percent.

Germany’s 10-year yield fell one basis point, or 0.01 percentage point, to 1.63 percent at 7:53 a.m. London time, the lowest since Aug. 5. The 1.75 percent bund maturing in February 2024 rose 0.1, or 1 euro per 1,000-euro face amount, to 101.075. German government bonds rose, sending 10-year yields to a six-month low, as sliding stocks boosted demand for haven assets.
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