UK construction PMI data released today reveal that the economy is still struggling to recover after the effects of the European debt crisis. According to Markit Economics, Purchasing Managers’ Index for the construction sector declined during June for the first time in a year and a half.
The 48.2 PMI was less than expected when compared to analysts’ forecast for the index to come in at 52.9 from May’s 54.4 survey result. A PMI under 50.0 indicates contraction in the sector.
The main driver behind the decline in the PMI was civil engineering and housing activity.
Sterling declined sharply ahead of the data release at 08:30 GMT as traders anticipated the poor numbers. GBPUSD fell to 1.5672 and then immediately rose after the data due to profit taking. The pair last traded at 1.5680 by 10:00 GMT but is expected to remain vulnerable ahead of the Bank of England interest rate announcement on Thursday. Recent weak UK economic data would make it more likely for more policy easing. Then this would weigh on the pound.
A separate report on mortgage approvals in the UK was released at the same time showing mortgage approvals to buy homes for the month of May were more than expected at 50,000. But overall they fell to 51,098 from May’s revised 51,627 loan approvals.