British construction 'losing pace'

Britain's construction sector appears to be rapidly losing pace, according to data today, which showed the weakest activity growth so far this year and a massive fall in new orders to their lowest since 1980.

The figures raise doubts about the strength of broader economic growth, which economists had hoped would pick up during the current quarter after a slowdown to just 0.2 per cent growth in Q2.

The Markit/CIPS construction PMI fell to 52.6 in August from 53.5 in July, the lowest reading since December 2010, although still above the 50-mark that separates growth from contraction and in line with economists' expectations.

And the Office for National Statistics said new construction orders in the second quarter slumped to their lowest level since the third quarter of 1980, dropping 16.3 per cent from their level just three months earlier.

The figures follow bad news yesterday for Britain's manufacturing sector, which contracted at its fastest pace in more than two years, according to a similar Markit/CIPS PMI survey of purchasing managers.

"One by one the engines of growth seem to be failing," said Philip Shaw, an economist at Investec.

The ONS figures are much weaker than those from Markit - a pattern that economists have observed previously this year - and Shaw had some doubts as to whether the decline in orders was quite as precipitous as the official data suggested.

The PMI survey pointed to a slowdown in orders growth, but not an outright fall, and both sets of data identified house building as the worst-hit sector.

"August data signalled slower growth of both output and new orders as headwinds caused by uncertain economic conditions impacted on sector performance," said the survey's author, Sarah Bingham, an economist at research company Markit.

"Confidence regarding future business expectations weakened to an eight-month low, highlighting concerns in respect of further potential cuts in government spending, but also a dampening of wider business sentiment," she added.

House building contracted for a third consecutive month, civil engineering slowed while commercial construction rose to a three-month high, albeit one that is below the series' long-run average.

Reuters