Belfast Telegraph

Friday 31 October 2014

Weak construction data fuels fears over economy

A REDUCTION in activity by housebuilders contributed to a marked slowdown in the construction sector last month, new figures show.

The Markit/CIPS survey, where a reading of above 50 represents growth, showed the sector grew at 53.3 in April, down from 56.4 the previous month.

This raised further doubts about the strength of the UK's economic recovery after quarterly GDP figures last week were hit by a 4.7% drop in construction output.

The figures revealed homebuilders saw their first decline in activity of the year, due to weakness in the housing market, while civil engineering also experienced a slowdown in the wake of the Government's austerity cuts.

However, commercial projects showed strong growth as UK business customers recover from the recession.

The figures suggest the sector is losing momentum with worrying implications for the UK's stuttering economy.

The industry shed jobs for the 10th month in a row, although only marginally, as input prices rose at their fastest pace for three years.

Confidence in the future remained lower than normal but rebounded slightly since last month, as new orders continued to rise.

David Noble, chief executive at CIPS, said: "Low activity levels in the housing market, tighter government purse strings, rising input prices in fuel and materials, as well as poor cash flow in some cases are clearly a worry.

"However business sentiment improved slightly compared to March.

"This partly reflects expectations that growth in the wider UK economy will help support construction activity."

Today's data follows figures that revealed manufacturing growth slowed to a seven-month low in April.

The weak performance of the UK economy makes it more likely that the Bank of England's Monetary Policy Committee will keep interest rates at their record low of 0.5% tomorrow.

Howard Archer, chief economist at IHS Global Insight, said: "The construction sector clearly faces a challenging environment, which is likely to limit activity over the coming months.

"In particular, the coalition Government's extended pruning of public spending will clearly limit expenditure on public buildings, schools, hospitals and infrastructure."

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