UK construction growth slows further in August

| September 2, 2011

The Chartered Institute of Purchasing and Supply (CIPS)/Markit purchasing managers’ index (PMI) has today revealed growth in the UK construction industry weakened in August.

The PMI dipped to 52.6 in August from July’s reading of 53.5 – however, the figure was in line with expectations.

Furthermore, the index remains above the crucial 50 mark, which separates growth from contraction.

However, the reading represented the lowest since the sector returned to growth eight months ago and the slowdown was attributed to weaker growth of both output and new orders.

Meanwhile, the survey revealed residential construction contracted for the third consecutive month, civil engineering activity slowed significantly, while commercial construction saw a slight improvement.

Commenting on the report, Sarah Bingham, Economist at Markit and author of the UK Construction PMI said: “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.”

Construction accounts for around 6% of Britain’s economic output.

Meanwhile, the index comes shortly after figures revealed UK manufacturing activity contracted at the fastest pace in more than two years in August.

The closely-watched CIPS/Markit manufacturing PMI fell to 49.0 last month from an upwardly revised 49.4 in July.

The latest figure means the index remains below the crucial 50 mark for the second consecutive month, which implies contraction within the sector.

The further slowdown was attributed to a sharp fall in demand for exports.

Both sets of figures will raise fears about the strength of the economic recovery and are likely to reinforce expectations that the Bank of England will leave interest rates at their record low of 0.5% when it meets next week.

However, it will fuel speculation that the central bank may consider a fresh round of quantitative easing (QE) – a scheme designed to boost the economy.

Service sector activity PMI figures will be published next week.

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