Construction sector growth slows further

Tim Wallace
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CONSTRUCTION growth slowed in May, influential survey data showed yesterday, with confidence draining from firms operating in the sector.

The construction purchasing managers’ index (PMI) from Markit fell to a three-month low of 54.4 – down from 55.8 in April, but still firmly above the “no change” level of 50.

Commercial activity was the strongest component at 56.5, down from 57.7, while civil engineering slowed sharply from 56.5 to 52.8.

Housing activity barely expanded at all, with an index reading of 50.9, down from 60.4 in April.

A major driver of the slowdown was a marked fall in new business growth, which dropped to its lowest pace in four months, while the rate of expansion in new work was also well down on the four-and-a-half year high seen in March.

But there were still strong areas, such as the employment outlook index, which climbed from 51.7 to 52.2 as output kept rising.

“While still in positive territory, the month-on-month fall in business confidence was the greatest since June 2010, which was when plans for the autumn government spending review were first announced,” said Markit economist Tim Moore.

“This reassessment of the year-ahead outlook represents worries within the construction sector that weakening economic conditions could leave firms running on empty again once existing projects have come to completion.”

The sector, which accounts for seven per cent of UK GDP, shrank by 4.8 per cent in the first quarter of 2012, according to latest estimates.