Construction growth slumps to one-year low


Construction activity slumped in August to its lowest level in a year.

The monthly survey of purchasing managers (PMI) showed a significant decline in building works, with a reading of 51.1 for last month – down from 51.9 in July.

The reading – the weakest overall UK construction performance since August 2016 – was close to the 50-point mark which shows stagnation.
A reading above 50 indicates growth. Economists had forecast a figure of 52.
Subdued business investment and economic uncertainty dragged on demand for new projects, according to Tim Moore, associate director at IHS Markit.
Firms reported a lack of new orders to replace completed ventures, with residential building the only area to buck the overall trend in August.
However, a robust rise in house building was offset by the marked decline in commercial projects – dropping at the fastest pace since July 2016.
Companies cited clients’ reluctance to commit to new projects, opting instead to delay spending decisions, and in some cases, scaling back planned ventures.

The sharp fall in the value of the pound since the Brexit vote has made UK goods cheaper and more attractive for overseas buyers.
However, the PMI survey, conducted by Markit/CIPS UK Construction, also showed the downside of the currency plunge, with firms linking higher costs to rising prices on imported raw materials and the exchange rate.
But the report said cost pressures were at their weakest since last September, with companies citing “successful negotiations with suppliers against a backdrop of softer market conditions”.
Duncan Brock, of the Chartered Institute of Procurement and Supply, said reduced government spending and economic and Brexit uncertainty were to blame for the sector hitting a roadblock.
“In the near-term future, without those new orders waiting in the wings, the performance of the construction sector is likely to continue to be downbeat,” he added.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the survey indicates the construction industry is “flirting with another recession”.

Source: SKY

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