THE TAKEAWAY: UK PMI for construction disappoints expectations at 49.5 -> Markit analyst sees continued weakness for remainder of 2012 -> Sterling trading higher
Activity in the UK’s construction sector contracted for the second straight month in September, according to Markit’s Purchasing Manager’s Index. The PMI for construction was reported at 49.5, which disappointed expectations for 49.9, but was higher than August’s 49.0 index result. A PMI below 50.0 signals contracted in sector activity.
Construction sector output declined in September, as new business experienced the second sharpest fall since April 2009. Residential building was the worst performing area of UK construction. Confidence in future output remains subdued, however construction sector employment grew over September.
The UK is suffering from 3 straight quarters of economic contraction, and Sterling investors are looking for signs of economic recovery. Today’s PMI release was not optimistic, and Markit Senior Economist said, “The principal take out from September’s PMI survey is that underlying construction weakness is likely to continue for the remainder of 2012.”
However, the British Pound did not react to the worse than expected PMI. GBPUSD continued to trade above 1.6150, and support could be provided by a year long downward trend line by 1.6108. Resistance could be provided by the key 1.6200 level.
GBPUSD 15-minute: October 2, 2012
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