Surprise slowdown in construction growth as housebuilding loses momentum

The monthly Markit/CIPS UK construction purchasing managers’ index (PMI) fell to 57.1 after hitting a four-month high of 58.1 in June, confounding a Reuters poll estimate for a rise to 58.4.

The slowdown may have reflected an easing of the surge in confidence among construction firms that followed May’s unexpectedly conclusive national election, survey compiler Markit said.

The economy picked up speed in the second quarter after a slowdown earlier in the year but was driven largely by its dominant services sector.

A separate Markit survey published on Monday showed British manufacturing grew weakly in July. Yesterday’s construction survey showed housebuilding activity increased at the slowest pace since April, marking one of the weakest expansions since mid-2013 and underlining the challenge that policymakers face in tackling Britain’s chronic housing shortage. The government last month announced a plan to remove obstacles to building new houses after it helped cause a surge in house prices by backing subsidies for people trying to get on the property ladder.

“Commercial activity was a key growth driver during July, which partly offset ongoing weakness in civil engineering and softer residential building trends,” Markit senior economist, Tim Moore, said.

“Survey respondents commented on a variety of growth constraints afflicting the residential building sector, including long lead-in times for new projects, scarce supplier capacity, skill shortages and stretched sub-contractor availa- bility.”

Construction firms took on fewer staff in July, although Markit said this was still higher than the historical average.