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Glenigan’s index of project starts, ONS new orders data and the monthly Markit/CIPS survey are all widely watched indicators of the construction market conditions and prospects.  A comparison of Glenigan’s data on underlying project starts against data from the ONS and Markit/CIPS currently provides a more positive trend in underlying market conditions than is shown by either of the other two indicators, why? 

The ONS has been criticised in recent years that its measurement of the construction industry is neither timely enough nor reflects true activity at that point in time. One consequence of this is that the market has come to rely on the Markit/CIPS Purchasing Managers Survey to gauge construction market activity; however while this indicator is much timelier in its availability it is based on responses from a panel of just 170 purchasing managers at main contractors reporting whether they have won more or less work during the month.

Glenigan is tracking over 70,000 live projects in the UK and uses this data to compile its indicator on underlying construction market activity based upon the value of projects that have started on site each month. This provides a timely and comprehensive measure of what is actually happening on the ground in the industry.

A recent study by the ONS comparing the PMI with their own data found that any differences in the two indicators are “not statistically significant” and that “there are no extended periods of divergence between them”.  

So what is it that accounts for the recent divergence in these different indicators? One factor identified by the ONS is that the divergence in between the two different indicators is due one being a monthly sample (PMI survey) and the other data based on quarterly observations (ONS data). 

As can be seen from the chart below it would appear that at points in time these separate indicators are telling quite a different story to what is actually happening with regards to the industry.  In particular the CIPS survey data in 2010 appears not to have picked up the surge in Government funded work pushed through prior to the general election. The current relative strength of the Glenigan indices reflects an improvement in underlying market conditions and the scarcity of major (£100 million) schemes that has depressed the ONS data series. 

Chart 1: Glenigan project starts compared to ONS and Markit/CIPS construction indicators

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