UK construction sector taps the brakes; PMI pulls back to 52.2

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Activity in the UK’s construction sector grew slower than expected in January, according to a closely-watched business survey of the sector.

The Markit/CIPS survey of UK construction firms hit 52.2 last month, down from expectations of 53.8 and ending a four-month run of rising PMIs after December’s figure hit 54.2. Construction accounts for around 8 per cent of UK GDP, with any PMI number above 50 indicating growth in the sector.

Markit noted the weakest rise in overall business activity since the post-referendum recovery began in September 2016, with the survey showing business activity and incoming new work both expanded at weaker rates than at the end of 2016.

All three sub-sectors, comprising housing, commercial and civil engineering, recorded softer rates of output growth in January.

Tim Moore, senior economist at IHS Markit and author of the report, said:

UK construction firms experienced a subdued start to 2017, with all the key categories of activity losing momentum. While housebuilding retained its position as the fastest growing part of the construction sector, the latest upturn was the weakest since the post-referendum rebound emerged in September 2016.

However, the report also identified bright spots in the sector. Confidence among survey respondents about the year ahead hit its strongest level since December 2015, which the report said largely reflected new project starts and a resilient economic backdrop. Job creation in the sector hit an eight-month high in January.

David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said:

Despite the biggest rise in input costs since August 2008, the sector was in buoyant mood at the start of the year, with highest level of confidence since December 2015.

In the short term at least, the outlook is positive, as long as economic conditions remain supportive and firms are able to control their rising costs.

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