Recession blow as construction activity drops

Tim Wallace
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CONSTRUCTION sector output fell in June, influential survey data showed yesterday, raising further fears that the UK economy will remain in recession for another quarter.

Markit’s purchasing managers’ index (PMI) fell to 48.2 in June from 54.4 in May – below the crucial “no change” mark of 50.

That represents the fastest contraction in output in two-and-a-half years, and comes after official data showed a 4.9 per cent fall in construction output.

Civil engineering activity fell most rapidly, with the index dropping from 52.8 to 44.7, while housing activity also fell to a reading of 46.5, having recorded very slow growth at 50.9 in May.

Commercial construction expanded slightly, with an index score of 50.7, down from 56.5 in May.

The picture may worsen in coming months, the survey showed. New orders fell for the first time since September 2011, with the index dropping from 53.9 to 47.9, while companies’ assessments of future output dropped to an eight-month low.

The weak outlook is also starting to impact on jobs – the employment index fell from growth of 52.2 in May to contraction at 48.9 in June.

“The anomaly of the double bank holiday at the start of the month will have had some negative impact,” explained David Noble, chief executive at the Chartered Institute of Purchasing and Supply.

“But the underlying sluggishness throughout the industry could point towards a much softer period heading into the third quarter.”