- Reuters/Eddie Keogh
LONDON – Growth in Britain’s construction sector slumped to its lowest level since the aftermath of the Brexit referendum in August and is getting close to recession territory, the latest PMI survey from IHS Markit and CIPS showed.
IHS Markit and CIPS’ latest PMI release for the construction sector – which measures expectations of growth – came in at 51.1 for the month of August.
That was down from an already weak reading of 51.9 in July, and also below the 52 reading expected by economists polled prior to the release.
“August survey data indicated that the UK construction sector continued to experience a slowdown this summer,” a release said.
“Reduced levels of commercial work were a key source of weakness, which offset robust growth in residential building.
“There were also signs of a sustained soft patch ahead, with new business volumes falling for the second month running.”
The purchasing managers index (PMI) figures from IHS Markit are given as a number between 0 and 100. Anything above 50 signals growth, while anything below means a contraction in activity – so the higher the number is, the better things look for the sector. A reading of 51.1 is worryingly low and indicates that the sector is close to contracting.
“August’s PMI suggests that the construction sector is flirting with another recession, following the 1.3% quarter-on-quarter fall in output in Q2. Although the PMI still is above the 50 mark that in theory separates expansion from contraction, it is below the 52 reading that has been the tipping point in practice,” Samuel Tombs of Pantheon Macroeconomics wrote in an email, adding that the sector is “crumbling under the weight of Brexit risk.”
Here is the chart:
- IHS Markit
Commenting on the numbers, Tim Moore, associate director at IHS Markit said: “UK construction companies indicated that lacklustre growth conditions persisted during August.”
“Survey respondents noted that subdued business investment and concerns about the UK economic outlook had led to a lack of new work to replace completed projects, especially in the commercial building sector,” he continued.
“There were signs that UK construction firms are bracing for the soft patch to continue into this autumn, with fragile business confidence contributing to weaker trends for job creation and input buying during August.”
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