UK construction sector continues expansion

For seven consecutive months, the UK construction sector expanded, albeit at a decreasing pace, which is adding to an emerging picture of slowing growth over the first quarter of this year.

The construction sector reported that house building slowed, while commercial construction and civil engineering activity grew more quickly a survey of purchasing managers showed.

Any headline index figure above 50 in the report indicates that activity is growing. In march this number had dropped to 52.2 from 52.5 in February.

The PMI figures for the past 3 months are consistent with output in the construction sector remaining flat between the final quarter of 2016 and the first quarter of 2017, said Pantheon Macroeconomics’ Samuel Tombs. This follows growth of 1.1 percent in the fourth quarter of last year.

The construction sector PMIs add to evidence that the UK economy continued to grow at the start of 2017, but at a reduced rate compared to the 0.7 percent rate achieved at the end of 2016.

The manufacturing sector also shows signs of slowing since the start of the year, following growth of 1.2 percent in the final quarter of 2016.

“UK construction firms experienced a growth slowdown in March, with the loss of momentum centred on house building,” said Tim Moore, senior economist at IHS Markit, which compiles the purchasing managers’ survey.

“Civil engineering [and] infrastructure continues to grow due to work from regulated utilities and major projects in the infrastructure pipeline,” said Noble Francis from the Construction Products Association. “The sharp fall in commercial contracts in 2016 is only expected to feed through from the end of this year.”

But the Chief European and UK economist at IHS Markit, Howard Archer, said there were “clouds in the outlook for the construction sector”.

“The strong likelihood that the economy will slow appreciably as 2017 progresses (despite its ongoing resilience in the fourth quarter of 2016) and a lacklustre housing market are serious concerns for the construction sector.”