Saturday, 21 July, 2018

United Kingdom construction sector records weak conditions in February

Housebuilding soft patch puts brake on construction output United Kingdom construction sector records weak conditions in February
Nellie Chapman | 03 March, 2018, 06:40

IHS Markit's final manufacturing Purchasing Managers' Index for the euro zone fell to 58.6 in February from 59.6, just pipping an earlier flash estimate of 58.5 and comfortably above the 50 mark that separates growth from contraction. Today's headline number was below the forecast of 55.9.

A reading above 50 indicates growth.

"US factories are enjoying one of the best growth spells seen since 2014, boding well for the sector to make a solid contribution to GDP in the first quarter".

The update comes after the manufacturing industry drifted to an eight-month low in February, with a jump in new orders failing to counter a slowdown in production.

Sterling was marginally lower against the USA dollar at 1.37 shortly after the announcement. Any score over 50 indicates growth but by comparison the average monthly score in 2017 was 52.3.

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI said: "The construction sector endured another hard month during February, with fragile business confidence, entrenched political uncertainty and softer housing market conditions all factors keeping growth in the slow lane".

Higher raw material prices, fuel bills and wages also hit construction companies, it suggested.

Tim Moore, Associate Director at IHS Markit and report author said: "While subdued house building and infrastructure work acted as a brake on the construction sector, this was partly offset by a sustained turnaround in commercial building".

"Civil engineering activity was the worst performing category in February, with survey respondents again commenting on a shallow pool of work to replace projects reaching completion".

"It is encouraging to see that commercial projects have increased at their fastest rate in February and shows that some businesses are pushing ahead with planned works in these uncertain economic times".

"Manufacturers will be hoping that the United Kingdom and European Union can come to near-term agreement on a post-Brexit transition arrangement - and that this dilutes uncertainty and encourages businesses to be more positive in their investment decisions and purchases of capital goods".

"Meanwhile, public sector investment is set to fall by 4.5% in 2018/19, provided the Chancellor does not revise the November Budget plans in this month's Spring Statement".

However, euro zone inflation slowed to a 14-month low in February, official data showed on Wednesday, underlining the ECB's caution in removing stimulus despite growth exceeding expectations.