Growth of UK construction sector activity eased in June

The growth of UK construction sector activity eased in June with slower expansion of new orders leading to weaker rise in activity.

How does this relect your experience in the sector?

See the attached PDF for the full Markit report.

Other key points:

  • Job cuts sharpest in five months
  • Cost inflation eased markedly; confidence deteriorates to lowest of 2011 so far

Sarah Bingham, economist at Markit and author of the UK Construction said:

“June data rounds off a further solid quarter of growth, albeit down on the first quarter. This contrasts with the surprising weakness seen in the official data for the first three months of the year.

“The contraction in residential construction provides further evidence to highlight the weakness of the household sector in recent months, with the sluggish property market linked to high unemployment, job insecurity and worries about the fragile economic recovery in general.

“More optimistically, commercial construction held up well, suggesting that companies continue to invest in new built assets, and civil engineering even showed a nice rebound from a lull seen in May.

“The worry is that the level of business confidence has fallen to a six-month low in the sector, which suggests that companies are expecting growth to weaken over the next twelve months. That is perhaps not altogether surprising given a marked easing in the rate of expansion of new business inflows in June.”

Commenting on the report, David Noble, chief executive at the Chartered Institute of Purchasing & Supply, said:

“Growth in the UK construction sector was broadly unchanged in June, despite reaching a milestone sixth month of expansion. Optimism about increases in activity was stifled by concern over the overall health of the economy and the level of both public and private sector spending.

“Civil engineering activity had a slight reprieve after a notable contraction in May, but commercial activity – still the strongest area of growth – slowed somewhat.  Meanwhile a reduction in residential construction was recorded, unsurprising given reports of sliding house prices. However, this was modest with almost three quarters of firms reporting no change.

“A solid reduction in employment indicated that firms are meticulously managing their costs, and prospects for any future expansions in output growth look moderate at best with confidence weakening.”

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