Construction has been hit hard by the slump in house sales since the credit crunch began – the number of transactions each month is still little more than half the level of the boom years
Britain’s construction sector slowed to “near stagnation” last month, adding to fears that the economy is sliding towards recession.
As the crisis in the eurozone intensified, hitting consumer confidence, the closely-watched Purchasing Managers’ Index for the construction sector slipped from 52.6 in August to 50.1 in September: only just above the crucial break-even mark of 50, which signals expansion.
Sarah Bingham – an economist at information provider Markit, which compiles the survey – said only a backlog of work from previous months had prevented the sector slipping into decline.
“Activity growth slowed to near-stagnation, with constructors relying on work on existing contracts to support output. This therefore bodes ill for construction activity in the coming months,” she said.
Construction has been hit hard by the slump in house sales since the credit crunch began – the number of transactions each month is still little more than half the level of the boom years. Cutbacks in government-funded projects such as the Building Schools for the Future programme have also hit builders.
September’s reading on the construction PMI was the lowest since December last year, when heavy snowfalls across much of the country brought work to a halt and drove the economy into a 0.5% contraction.
Howard Archer of IHS Global Insight said: “It is evident that the construction sector faces an extremely challenging environment, which threatens to limit activity over the coming months. In particular, the government’s public spending cuts are limiting overall expenditure on public buildings, schools, hospitals and infrastructure (even though the government is keen to prioritise some infrastructure projects). On top of this, house building activity is likely to be constrained by persistently weak housing market activity, soft prices and a worrisome outlook.”