UK construction picks up pace in Jan, but new orders slow

[LONDON] Growth across Britain's construction industry picked up slightly in February, driven by the civil engineering sector, though a slowdown in new orders added to recent mixed signals for the economic outlook, a survey showed on Thursday.

The Markit/CIPS Construction Purchasing Managers' Index (PMI) edged up to 52.5 from 52.2 in January, above forecasts in a Reuters poll that had pointed to an unchanged reading.

Growth in housebuilding cooled to a six-month low and commercial construction activity contracted for the first time in four months, but this was outweighed by an improvement across civil engineering firms.

New orders increased at the slowest pace since October and construction companies found scant respite from spiralling price pressures, which increased last month at a pace just shy of January's 8-1/2-year record.

"Survey respondents mainly cited an underlying slowdown in sales growth, with the latest rise in new work the weakest for four months," said Tim Moore, senior economist at survey compiler IHS Markit.

"In some cases, construction companies reported that sharply rising input prices had a disruptive impact on contract negotiations."

Optimism among construction companies declined a little after hitting a 13-month peak in January.

Construction accounts for around 6 per cent of British economic output, a fraction of the size of the dominant services industry. Markit is due to publish its PMI for services on Friday.

The Bank of England is watching closely for signs of a slowdown in Britain's economy this year, caused by rising inflation and weaker spending power among consumers. However, it has forecast growth of 2 per cent, stronger than expected by economists polled by Reuters.

REUTERS