UK construction growth slows

Growth in British construction activity hit a three-month low in May as expansion in new orders abated and optimism about the coming year weakened sharply, a survey showed on Wednesday.

The Markit/CIPS Construction Purchasing Managers' Index (PMI) fell to 54.4 from 55.8 in April, staying above the 50 level which separates growth from contraction and beating forecasts f or a fall to 54.2.

However, the reading was the lowest in three months.

Coming soon after news that Britain's manufacturing sector shrank at its fastest pace in three years in May, the construction release further dents hopes of an early end to recession and raises the chances of more stimulus from the Bank.

New business growth in construction eased markedly to its weakest in four months, with some firms noting that lower confidence in the economic outlook had depressed demand f or new projects in May.

Around a third of respondents thought their output would increase in the next 12 months, while almost a fifth expected a reduction. The resulting balance signalled that the degree of positive sentiment about future business fell to its weakest since October 2011.

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 Tim Moore, senior economist at Markit, which compiles the survey.

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."

Nonetheless, construction firms expanded their workforces for the third month running, driven by growth in business activity during May.