UK construction activity edges lower in September

| October 5, 2011

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

The closely-watched PMI dipped to 50.1 in September from August’s 52.6 – the figure was lower than the 51.7 expected by analysts.

Furthermore, the index is hovering dangerously close to the crucial 50 mark, which separates growth from contraction.

Markit highlighted that there were fewer new orders and this was the reason behind the slowdown in output growth.

However, staffing levels rose slightly but confidence remained subdued, “with uncertainty over future economic conditions weighing on optimism.”

Commenting on the report, Sarah Bingham, Economist at Markit and author of the UK Construction PMI said: “Activity growth slowed to near-stagnation, with constructors relying on work on existing contracts to support output. This therefore bodes ill for construction activity in the coming months.

“UK construction companies continued to struggle in the face of growing concerns about the wider economy, with weaker client confidence leading to a reduction in new business received during September,” she added.

In the meantime, a depressed housing market means residential construction growth was sluggish, while civil engineering activity continued to slow since Government spending cuts have reduced the public funds available for these types of projects.

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

Meanwhile, the figures come just a day after it was revealed manufacturing activity bounced back last month.

The closely-watched CIPS/Markit manufacturing PMI rose to 51.1 in September from August’s reading of 49.4.

Activity has contracted for the last three months and today’s survey means the index has moved back above the crucial 50 mark – which separates growth from expansion.

The reading was also better than forecasts of 48.6.

The pick-up means the Bank of England is likely to keep interest rates on hold at the historic low of 0.5% when its rate-setting committee meets tomorrow.

However, speculation is still mounting as to whether the Bank of England will reintroduce is quantitative easing programme this month – a scheme designed to stimulate growth.

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