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Tough Winter Puts Uk Construction Sector Into Contraction

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Britain's construction activity shrank in December as the snow disrupted business, marking an end to nine months of growth and disappointing hopes the sector could stay in recovery mode.

Growth in the building industry had been slowing even before the bad weather hit, creating conditions that made outdoor work extremely difficult.

However, the deterioration month-on-month in the Markit/CIPS purchasing managers index (PMI), was worse than expected at 49.1 – where any figure below 50 indicates contraction.

Economists had expected the sector’s to slow from November’s modest 51.8 but to stay in growth territory, with the consensus forecast for a reading of 50.9.

Jeremy Cook, chief economist at currency exchange broker World First, said: “This isn’t really a surprise after the ‘snow-apocalypse’ which we experienced last month - coupled with the typical Christmas slowdown. However it is still a cause for concern.

“Construction spending has formed a significant part of the strong GDP figures we have seen recently, and it sets the UK up for a slip in the fourth quarter figures.”

The sector, although only accounting for a little over 6pc of GDP, helped drive the UK’s strong economic growth in recent months.

The building industry accounted for 0.4 of a percentage point of the second quarter’s 1.1pc expansion and another 0.2 percentage point of the overall 0.7pc growth seen in the third.

Since that rapid expansion, which came as the sector recovered from the deep contraction experienced during the recession, construction has been in slowdown.

The latest PMI showed a small rise in the number of new orders, which was taken as confirmation that the bad weather was to blame for the dampened levels of current activity.

However, there were also signs of continued underlying problems.

Employment fell sharply as companies kept cutting jobs, at an accelerating rate, and confidence about future business prospects stayed relatively weak.

Of the three sub-sectors, only commercial construction saw activity increase in December, and it was at the slowest rate in the last 10 months.

Civil engineering and house building both shrank, with residential construction falling at the fastest rate since April 2009, indicating the knock-on effects of a stagnant housing market.

Businesses will be hoping they will enjoy a “catch-up” effect when the thaw sets in, as they did following the last harsh winter.

However, conditions look more challenging this time around, as government cutbacks hit spending on public building.

The disappointing performance was in marked contrast to the recent manufacturing PMI, which showed the sector had its strongest performance for 16 years in December, as exports drove new orders.


Tough winter so far and that is a serious drop in numbers when comparing the GDP influence that construction has :ph34r:

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