By Daniel Hunter
UK construction companies signalled a reduction in business activity at the end of the second quarter. At 48.2 in June, down from 54.4 in May, the seasonally adjusted Markit/CIPS Construction Purchasing Managers’ Index (PMI) pointed to the fastest rate of contraction for two-and-a-half years.
The fall in the index over the month was also the greatest since February 2009, thereby signalling a marked loss of momentum following the solid expansion seen in the previous survey period.
Anecdotal evidence attributed part of the decline to the extra bank holiday in June, but panellists also widely commented on weaker underlying business conditions. Civil engineering and housing activity were the worst performing broad areas of the construction sector, with both seeing a drop in output for the first time since the weather-affected downturn in January. Commercial activity meanwhile increased only marginally, and at the slowest pace for 28 months.
“The UK construction sector moved back into reverse gear in June, with output falling at its fastest pace since the end of 2009 amid a steep decline in civil engineering," Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI, said.
"A drop in business activity was perhaps inevitable given that the month started with an additional bank holiday and ended with severe weather across large parts of the UK.
“However, these temporary factors should not be overplayed, as the latest figures reveal worsening underlying business conditions within the sector. Construction firms’ assessment of future output dropped to an eight-month low in June, whereas past disruptions, such as heavy snowfall at the start of 2012 and the 2011 Royal Wedding, boosted future expectations as companies anticipated that a catch-up effect would follow.
“New business intakes meanwhile dropped at the fastest pace since April 2009, while a lack of work to replace completed projects resulted in falling employment after a three-month period of cautious job hiring.”
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