Construction outlook weak

City A.M. Reporter
Activity in the construction sector picked up in September, but firms’ confidence about the future fell to an 18-month low on worries about government spending cuts, a survey of purchasing managers showed yesterday.

The Markit/Chartered Institute of Purchasing and Supply construction PMI rose to 53.8 in September from 52.1 in August, confounding expectations for an easing to 51.4. A reading above 50 indicates growth in activity.

The survey said growth in the industry was led by the commercial sector and civil engineering, which reported its strongest activity since February 2008. Activity in the house-building sector fell, ending a 12-month period of growth.

New orders remained in positive territory in September, but the rate of growth eased for a fourth successive month and firms cut jobs at their fastest pace in six months.

The mixed construction data comes after a similar survey of factory purchasing managers last week showed the sector grew at its slowest pace in 10 months, indicating overall economic growth is likely to slow sharply from a 1.2 per cent expansion in the second quarter.

“While the construction sector only accounts for 6.3 per cent of national output, the apparent substantial slowdown in activity over July to September adds to the evidence that growth slowed markedly in the third quarter,” said Howard Archer, economist at IHS Global Insight.

Deep upcoming government spending cuts will hit the construction sector particularly hard, with many public building and infrastructure projects likely to be shelved as the government seeks to eliminate its massive budget deficit over five years.