UK construction PMI hits 10-month low as housebuilding growth suffers setback

The UK construction sector saw an unexpected decline in growth in February, when output hit a 10-month low, a survey released on Wednesday (2 March) showed. The Markit/CIPS UK Construction Purchasing Managers' Index (PMI) fell from 55 to 54.2 last month, falling short of analysts' expectations for a 55.5 gain and marking the slowest rise in construction output since April 2015.

Housebuilding expanded at the slowest pace since June 2013, the report added, while construction firms hired staff at the weakest rate since August 2013 as optimism faded.

"Aside from the pre-election slowdown last year, the latest upturn in construction output was the weakest for over-two-and-a-half years," said Tim Moore, senior economist at Markit. "What's different this time around is that construction companies have cut back on employment growth in response to the uncertain business outlook."

The report added construction firms purchased goods and material at the slowest pace since mid-2013, an indication businesses in the sector are bracing themselves for a potentially prolonged period of softer growth this year.

"The marked slowdown in the housebuilding sector, which once led the way in terms of growth, is of chief concern," said Kalpana Padhiar, construction specialist at Euler Hermes.

"Falls in business confidence levels across construction, resulting from rising global financial uncertainty and strong economic headwinds are clearly having a significant impact. However, the likelihood of several large infrastructure projects finally getting off the ground does offer some encouragement."

On 2 March, Markit's manufacturing PMI showed British factories had their weakest month in nearly three years in February and the survey on Britain's construction sector will fuel worries over the state of the UK economy.

Howard Archer, chief European & UK economist at IHS Economics, said: "This is a disappointing survey through and through and the government will be particularly disappointed to see housebuilding slow to its weakest level since June 2013 given that it is looking to address the UK's acute housing shortage.

"Furthermore, slower orders growth, reduced business expectations and reduced employment growth does not paint a happy picture for construction activity in the near term at least."