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The Markit/CIPS UK Construction Purchasing Managers’ Index recorded a reading of 48.6 for May, down from 50.5 in April. Economists were expecting a figure of 50.5. A reading above 50 indicates growth; below represents contraction.
Last month’s reading is the lowest since extreme weather during last year’s Beast from the East prevented construction work from going ahead in March 2018. It is also the third time the sector has contracted in the past four months.
The latest snapshot measure of activity in the sector, based on a survey and known as the Purchasing Managers’ Index (PMI), came in at 45.3 – substantially below the 50 level that indicates no change from the previous month.
That is the second-lowest level since April 2009, when the economy was still in the midst of a recession triggered by the financial crisis. The worst reading since then was in June, an only slightly lower 43.1.
“If the current speed of construction sector retrenchment is sustained, it will soon ripple through the supply chain, and spillovers to other parts of the UK economy will quickly become apparent.”
The measure of the sector’s optimism about the year ahead dropped to its lowest level since November 2012 as firms worried about Brexit, the prospect of a general election and delays to infrastructure work.
In the nearer term, the outlook was also bleak as the number of new orders fell sharply, with firms blaming mainly a sluggish economy and political uncertainty.
Howard Archer, chief economic adviser to the EY ITEM Club, pointed out this was the first time since 2016 that new orders had fallen for four successive months.
“The weak July construction survey increases the concern that the UK economy has started the third quarter poorly, after GDP likely stagnated in the second quarter and could have contracted marginally,” he said.
The PMI measure of the larger manufacturing sector, released on Thursday, was also weak, coming in at 48 – the same as in June and the lowest level in six and a half years.
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