Press release

6 Jul 2021 London, GB

Highest construction PMI for 24 years caps off a strong June for the economy – EY ITEM Club comments

June’s construction PMI pointed to a sector emerging from the pandemic in fine fettle.

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  • June’s construction PMI pointed to a sector emerging from the pandemic in fine fettle. The index rose to 66.3, the highest since June 1997. Growth in June was broad-based across all major construction sub-sectors, aided by the reopening of the economy.  
  • Growth in construction output may not be quite as strong as the PMI suggests. Survey responses may be swayed, in part, by improved sentiment following the economy’s reopening over the spring. But PMIs for services, manufacturing and construction all recorded strong readings in June, reinforcing the EY ITEM Club’s expectation that Q2 delivered a healthy rebound in GDP.  

Martin Beck, senior economic advisor to the EY ITEM Club, says: “June’s construction PMI of 66.3 advanced on 64.2 the previous month and was the highest in 24 years. A rise in the construction index bucked the pattern of slippages seen in the same month’s services and manufacturing indices. But collectively, the PMIs recorded a very strong performance. And, even allowing for the tendency of the PMIs to overplay changes in activity at times of big shifts in sentiment, the economy looks to have shrugged off the delay to lifting remaining COVID-19 restrictions.

“The outlook for the construction sector is promising, suggesting that the PMI will remain elevated for some time to come. Confirmation that almost all remaining domestic COVID-19 restrictions, including social distancing on construction sites, will end on 19 July should make life easier for the sector. Continued buoyancy in the housing market should support new home building, while maintenance and repair activity will gain from a rise in demand for home improvements and the need to retrofit buildings to meet the Government’s net zero ambitions. And the step-change in levels of public sector investment announced over the last year, including spending on infrastructure projects like HS2, will further boost activity.

“On the other hand, prospects for the commercial property sector remain clouded by the uncertainty over changes in working practices prompted by lockdowns. There is also growing evidence of a construction labour shortage, which may have been deepened by some EU workers returning home due to the pandemic. Meanwhile, supply chain disruption is exacerbating cost pressures. But overall, the construction sector looks better placed for sustained growth than at any time for more than a decade.”