UK Construction Sector Growth Slows in May - PMI

UK construction sector activity is rising though output growth fell to a three month low in May, says a private industry survey.

The increase in activity actually puts it at odds with official data showing a collapse in the sector that dragged the country back into recession.

The purchasing managers index (PMI) from Markit and the Chartered Institute of Purchasing & Supply (CIPS) dropped to 55.4 in May for the UK construction sector, from the previous month's 55.8, as new business slowed and confidence drained.

An index figure over the neutral 50 mark represents growth, while under signifies contraction.

"With purchasing activity softening in response to weaker demand, suppliers of raw materials will be tempted to keep ever smaller inventories, meaning the response to any future pick-up in demand may be sluggish," David Noble, chief executive of CIPS, said.

New business grew at its weakest pace for four months in May, while purchasing managers' confidence about the future outlook saw its biggest month-on-month fall since June 2010.

"This reassessment of the year-ahead outlook represents worries within the construction sector that weakening economic conditions could leave firms running on empty again once existing projects have come to completion," Tim Moore, senior economist at Markit, said.

Cost inflation remained steady from its 25-month low in April, as subdued demand helped temper rising fuel and steel costs in May's price negotiations with suppliers.

Britain is back in recession, according to the latest official figures from the Office of National Statistics (ONS), with a sharp drawback in construction sector output.

UK GDP contracted by -0.3 percent in the first quarter of 2012, following on from a -0.3 percent contraction in the last three months of the previous year.

This was marked by a -4.8 percent plummet in construction sector output said the ONS.

Other recent PMI data for the manufacturing sector showed output collapsing to a three year low.

Manufacturing PMI came in at 45.9 for May, much worse than expected and the second steepest decline in twenty years. Analysts were predicting a reading of 49.7.