E prices fell much faster than expected last month and construction activity slowed, industry surveys showed yesterday, reinforcing concerns that economic growth will fall off sharply.
The strongest quarterly construction growth for decades pushed British economic growth to a nine-year high of 1.2 per cent in the second quarter, but the Markit/CIPS purchasing managers’ index (PMI) suggests this is slowing rapidly -- driven partly by weaker house prices.
House prices dropped a bigger-than-expected 0.9 per cent in August after a 0.5 per cent decline in July, the sharpest fall since February, according to the monthly survey from mortgage lender Nationwide.
July and August marked the first two consecutive monthly house price falls since the decline in British house prices levelled off in February 2009, and the annual rate of house price growth slowed to 3.9 per cent from 6.6 per cent, well below forecast.
“As fears of a double dip in the housing market take hold, builders will likely feel less urgency to begin new developments,” said Nomura UK economist Philip Rush.
A fall in the rate of new home building pushed the PMI down to a six-month low of 52.1 in August from 54.1 in July.
This was a sharper slowdown than economists had expected since the boost to second quarter output from projects that had been delayed because of icy winter weather faded away.
CIPS chief executive David Noble said: “The most disturbing is the marked slowdown in the residential sector as this is where 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.”