The Pound has risen by 0.5% against the South African Rand despite disappointing UK construction data.
Weakness in the Rand meant GBP/ZAR didn’t succumb to the current trend of declining Pound exchange rates on Tuesday.
Sterling was softer elsewhere as UK construction PMI came in worse-than-expected in September, showing a drop into contraction from 51.1 points to 48.1.
Among those analysing the UK’s poor construction score has been Duncan Brock, a Director at the Chartered Institute of Procurement and Supply. Giving a bleak assessment, Mr Brock said;
‘A dismal picture of construction emerged this month as the sector showed signs of worsening business conditions across the board. With the biggest contraction in overall activity since July 2016, and a drop in new orders, optimism was in short supply.
Respondents pointed to obstructive economic conditions and the Brexit blight of uncertainty, freezing clients into indecision over new projects. Even housing stuttered with a dwindling performance’.
Meanwhile, Samuel Tombs of Pantheon Macroeconomics warned;
‘Steeper declines in construction output likely lie ahead, given that official data show that new orders fell by 7.8% quarter-on-quarter in the second quarter – the biggest drop for five years’.
As well as less construction activity meaning less economic activity, another implication has been that there are fewer houses being built.
The latest Conservative Party conference has brought the announcement that £10bn will be put into the Help to Buy scheme.
With the UK in the grips of a housing shortage, however, this has raised concerns that there will simply be more people trying to access the same limited housing stock.
Manufacturing Stats Leave Rand Struggling
While the Pound has been damaged by poor construction data today, the Rand has come off worse.
Poor domestic manufacturing PMI data has been responsible for ZAR’s decline.
Expectations had been for an increase from 44 points to 46, but instead a smaller increase to 44.9 has been recorded, leaving the sector well in contraction territory.
Further PMIs to Drive GBP/ZAR Exchange Rates
This week, Pound/South African Rand exchange rate movement may occur in response to Wednesday’s UK services PMI and South Africa’s PMI.
If UK services activity declines, the Pound may tumble as the services sector is the largest UK economic contributor.
On the other side, if the South African Standard Bank PMI shows continued contraction in September the Rand will remain under pressure.