UK construction falls back after weak recovery

Ben Southwood
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UK construction output sank back into decline in November, with analysts predicting even worse conditions ahead.

The construction purchasing managers’ index (PMI) for November was 49.3, data from Markit and the Chartered Institute of Purchasing and Supply (CIPS) showed yesterday, down from 50.9 in October, and falling back below 50, which indicates decline. The figure is even further below the long-run average of 54.1.

Analysts could extract almost nothing positive out of the data, noting the poor figures for new orders and construction firms’ own gloomy sentiment.

“Parallels to darker days of the economic crisis can be seen in the construction sector, which is under pressure from all sides,” said CIPS chief executive David Noble.

“Jobs have been slashed in response to the fastest fall in new orders for over three and a half years, confirming the sector’s return to contraction, and the lowest levels of confidence since the height of the economic crisis in 2008.”

The industry is facing a double whammy of declining housebuilding and input price inflation close to last month’s 10-month high, Noble added, with marginal growth in civil engineering providing little consolation.

This roundly pessimistic appraisal of the numbers was shared by IHS Global Insight’s Howard Archer, who said the “dismal” data only added to evidence suggesting there would be “further construction contraction in the fourth quarter.”

This would only add to the consecutive falls seen in the last three quarters, and along with manufacturing weakness, could push the UK economy back into contraction, Archer said.

“With the construction sector seemingly headed for further contraction and with the manufacturing sector still struggling, the economy is going to be reliant on clear expansion in the services sector to avoid a renewed GDP dip in the fourth quarter,” he warned.