UK construction sector grows at weakest pace in 5 months in Oct

London

BRITAIN'S construction sector expanded at the weakest rate in five months in October as signs of a housing market slowdown caused a slowdown in the building of new homes, a survey of purchasing managers showed on Tuesday.

The Markit/CIPS UK construction PMI fell to 61.4 in October from 64.2 in September, a steeper decline than the drop to 63.5 forecast in a Reuters poll of economists.

The index has now been above the 50 threshold denoting growth for a year and a half, the longest continuous period since the global financial crisis in 2007/08.

But all three broad areas of construction activity posted a smaller rise in output than in September, with house building falling to its lowest rate of growth in 12 months. "October's survey provides the first indication that the chill winds blowing across the UK housing market have started to weigh on the booming residential building sector," said Tim Moore, senior economist at Markit.

Bank of England (BOE) data last week showed that lenders approved the smallest number of new mortgages in more than a year in October, and annual house price inflation has eased off a peak of more than 10 per cent reached earlier in the year.

British regulators ordered lenders in April to make more detailed checks of borrowers' ability to repay mortgages, and in July the BOE said that banks should restrict the amount of mortgages they issued at high loan-to-value ratios.

Nonetheless, Markit said that construction firms thought the overall outlook was strong, and the slowdown in commercial and civil engineering work was relatively modest. "Despite signs that the house building recovery has lost some intensity, UK construction companies remain highly upbeat about their overall prospects for growth," said Mr Moore.

Survey respondents cited improving domestic economic conditions and a rise in investment spending as reasons for their optimistic outlook.

A similar survey of manufacturers on Monday showed stronger-than-expected growth, though exports fell and the overall pace of growth in the sector was slower than in construction.

Construction makes up about 6 per cent of Britain's economy, and official data showed that output grew by 0.8 per cent in the three months to September, slightly faster than the economy as a whole. REUTERS