Construction recovery runs out of steam

Grant Prior 11 years ago
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The fledgling construction recovery is running out of steam according to the latest survey of purchasing managers.

Figures released today show UK construction continued to expand in August.

But the rate of growth slipped for the third successive month as the residential market wobbled and fears gather over future workloads.

The Markit/CIPS Construction Purchasing Managers’ Index posted a reading of 52.1 – down on July’s reading of 54.1 and the third month to record a fall since the recent high in May.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said: “Those who are looking for signs of a slowdown will find plenty to worry about in this month’s construction PMI.

“The most disturbing is the marked slowdown in the residential sector as this is here much of the recent sector growth has come from.

“The slight increase in public sector activity disguises continuing uncertainty about the scale of spending cuts which we have yet to experience.

“Employment levels falling for a second successive month will cause deep concern, not least for the ripple effects they may have on other sectors.

“For the more optimistic amongst us, however, it still looks like we are entering a period of low growth rather than another recession but the jury’s still out.

“Though this month’s figures are disappointing, we should remember that overall the sector is still growing.

“The housing market is key to recovery in the longer term but now appears to be in a transition phase.  There is still a job to be done in balancing stricter criteria for mortgage lending with demand for new homes, if new projects are to get off the ground and reverse the slump in the residential sub-sector.”

Sarah Ledger, Economist at Markit and author of the UK Construction PMI said:

“PMI data indicated that the UK construction sector continued to expand in August.

“However, overall activity growth lost further momentum, with the headline index over six points lower than May’s recent high, led by a marked slowdown in residential construction growth.

“Although higher than in July, the degree of positive sentiment amongst UK constructors remained subdued in the context of historical data, as concerns over public sector spending cuts persisted.

“As a result, staff numbers fell for the second successive month, with companies displaying caution with regard to hiring.”


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