UK construction hits a six-month low

Friday, January 4th, 2013


British construction hit a six-month low as the downturn in the sector deepened as a result of a "sharp and accelerated" drop in new orders.

Weak underlying demand caused the PMI index to show the fastest rate of contraction since June 2012, dropping to 48.7 in December from 49.3 in November.
Poor weather was also cited as leading to longer than expected seasonal breaks at the end of 2012.
December was the seventh consecutive month that volumes of incoming work had fallen and the contraction in new orders was the fastest since April 2009.
The Markit/CIPS UK Construction Purchasing Managers’ Index - which measures overall output in the sector - has now posted below the neutral 50.0 value in four of the past five months.
Housing activity was by far the weakest performer of the three construction sub-categories that are monitored by the survey in December, with the pace of contraction in residential building the seventh in as many months and the strongest since the snow-related drop in December 2010. Commercial activity also decreased in December for the fifth straight month, but civil engineering bucked the overall trend by posting another moderate expansion. Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said the December figure "rounded off a miserable year for the UK construction sector". "Survey respondents are also relatively subdued about the 2013 outlook amid reports from their clients that budgets will be under even greater pressure over the year ahead," he added. Howard Archer, chief UK & European economist at IHS Global Insight, said that while the construction purchasing managers’ survey has "not always been the most accurate indicator for the health of the sector", the weakness of the survey "provides a reminder that the sector still faces a very challenging environment". "The key question going forward is will the construction sector see any significant improvement in its fortunes in 2013?," he said. "It certainly continues to face major headwinds, notably including reduced public investment and spending, an extended weak economy, a struggling housing sector, and problems in getting funding for large-scale projects. "The construction sector will be fervently hoping that the economy can see sustained growth in 2013 and that this stimulates building work. "The sector will also be hoping desperately that the government comes up with more support and initiatives to lift activity on top of the limited help provided in the Autumn Statement In Chancellor George Osborne's Autumn Statement last month he unveiled plans to invest £5bn in construction over the next five years. It has confirmed this will include £700m in new schools, £370m in road improvements, and more than £300m on motorways. in a bid to drive the economic recovery. Construction accounts for just 6.8pc of UK national output but has been one the main drags on economic growth since the crisis, and remains about 15pc smaller as an industry that its 2008 peak. The disappointing figures come a day after figures showed that British manufacturing sector grew unexpectedly in December at the fastest pace in 15 months, boosting hopes of a better 2013 for the sector. By Rebecca Clancy
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