Construction loses momentum to fall to eight-month low

ACTIVITY in the construction sector slowed more than expected in October to its weakest level in eight months, a closely-watched survey showed yesterday suggesting one of the key areas of recent UK economic growth could be faltering.

The Markit/Chartered Institute of Purchasing and Supply construction purchasing managers index fell to 51.6 in October from 53.8 in September, against expectations for a more modest easing to 53.0. But still remained above the all-important 50 mark, which denotes expansion, rather than contraction.

Construction contributed about a quarter to the 0.8 per cent growth recorded between July and September and around half of the 1.2 per cent growth in the second quarter, although it makes up only six per cent of total output.

“The survey indicates that construction activity is losing momentum and the economy will not be able to rely on a significant growth contribution from the sector going forward,” said Howard Archer, economist at IHS Global Insight.

The survey showed activity in the housing and civil engineering sectors fell in October, although commercial construction increased significantly.

New orders continued to rise, albeit at the slowest pace in eight months, and firms cut jobs for the fourth month running even though businesses remained optimistic about the prospects for the coming 12 months.

The construction sector was responsible for a quarter of the 0.8 per cent GDP growth in the third quarter.