News Article

Sector Analysis

UK construction sector declines for the third consecutive month

By CreditMan Wednesday, April 3, 2013 - Apr 03, 2013 13:21 CEST

The UK construction sector shrank for the third month in a row in March, according to official data released Wednesday morning, suggesting the sector will have weighed on economic growth in the first quarter.

The Markit/CIPS Construction Purchasing Managers' Index (PMI) inched up to 47.2 from 46.8 in February, holding below the 50 level that separates expansion from contraction and slightly undershooting forecasts for 47.5.

Markit, which compiles the survey, said unusually cold weather combined with sluggish underlying demand kept a lid on construction work in March.

Civil engineering was by far the worst performing area of construction activity last month, according to Markit. There was a steep drop in output, with the pace of contraction the fastest since October 2009.

"The negative print for construction output mirrors that seen for manufacturing, and now leaves the service sector as the last great hope for avoiding another slide in UK GDP," said Tim Moore, senior economist at Markit.

Despite the weak headline number, the construction sector showed some signs of resilience last month, according to Wednesday's survey.The decline in new orders was the least sharp since October, while house building grew at the fastest rate since May 2012.

The promising trend in residential work helped lift optimism among firms to its highest level in almost a year, as they forecast a rise in output over the coming 12 months.

The Treasury and the Bank of England have announced several measures since last year to try to boost the housing sector, including government plans to guarantee up to £130bn of mortgage issuance.

With figures earlier this week showing that manufacturing activity had contracted, the services sector remains the best hope for Britain avoiding a fresh recession.

A PMI survey for the service sector in March is due out on Thursday, giving a clearer sign of whether Britain's economy avoided its third recession in less than five years, having already contracted in late 2012.