Construction suffers June slowdown 

The Markit/CIPS UK Construction Purchasing Managers’ Index fell to 54.8 from May’s 18-month high of 56.0.

Published yesterday, the construction PMI also showed optimism in the sector about business over the next year slipped to a four-month low.

Cost pressures for goods bought by construction firms picked up again in June after receding in the previous three months.

Consumer price inflation in Britain is running at 2.9 percent, an almost four-year high.

Growth in the housebuilding, commercial and civil engineering sectors slowed from May but the PMI still signalled a solid pace of expansion overall.

“Survey respondents commented on renewed caution among clients, in response to heightened political and economic uncertainty,” said Tim Moore, senior economist at IHS Markit, which compiles the PMI.

Howard Archer, Chief Economic Advisor to the EY ITEM Club, said: “Following on from a significantly weaker manufacturing survey, the softer construction PMI points to the economy faltering in June as heightened political uncertainties have fuelled business and consumer caution. Much attention will be focused on Wednesday’s release of the PMI for the key services sector, which has been finding life generally much more challenging in 2017.

“June saw a slowdown in construction activity across all sectors, although housebuilding activity was still at the second highest level since December 2015.

“A slowdown in new orders growth to a three-month low pointed to construction activity losing momentum going into the third quarter and this was reflected in confidence in the sector relapsing to a 2017-low.

“While the construction purchasing managers’ surveys still point to the sector growing in the second quarter, despite June’s relapse, this looks very far from certain. The latest hard data show that construction output fell back 1.6% month-on-month in April, so there will have needed to be decent growth in both May and June for the second quarter to see an expansion. Construction output grew 1.1% quarter-on-quarter in the first quarter.

“Construction companies also saw their input prices rise at a faster rate in June. Construction companies’ input costs have been rising at a historically high rate due to the weakened pound.

“Weakened economic activity and uncertainty. Could pose a damaging combination for the construction sector over the coming months.

“And while house building is seemingly currently holding up well, this could be pressurised by extended lacklustre housing market activity and subdued prices amid weakened consumer fundamentals.

“Construction companies will be hoping that recent Government measures aimed at boosting infrastructure and housebuilding have a material beneficial impact.”