Growth in Construction sector begins to slow

Growth in the construction sector slowed last month despite more evidence that housebuilders are enjoying their busiest period since before the recession.

Construction workers on a new-build home site. The construction sector is beginning to show signs of slowing down. Picture: Getty

A reading of 60.8 in April for the Markit/Cips purchasing managers’ index (PMI) – where 50 separates growth from contraction – represents a slowdown on the rapid pace seen over the winter, including a figure of 62.5 a month earlier.

Yesterday’s data came a day after news that the manufacturing sector PMI indicated its fastest growth for five months during April, with a better-than-expected reading of 57.3.

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The figures suggest that Britain’s economic recovery remains one of the strongest in the western world. But with services accounting for more than two thirds of UK output, economists will have to wait until after the bank holiday weekend for the dominant sector’s first PMI reading of the new quarter.

Howard Archer, below, chief UK economist at IHS Global Insight, expects the reading for the service sector to be above the 57.6 posted in March.

He said: “The recent sustained improvement in economic activity is supporting demand across a wide range of business services, such as marketing and advertising, PR, corporate finance transactions, IT provision, accountancy, legal advice, recruitment, training and haulage.”

Tuesday’s figures will give the first real indication of whether the wider economy can increase the pace of growth beyond the 0.8 per cent in the first quarter of 2014.

Last month’s moderation in construction reflected the quietest month in civil engineering since September as firms lose the boost to workloads relating to flood relief.

But the rate of expansion in housebuilding was one of the fastest seen over the past ten years, with the current 15-month period of continuous house-building growth the longest since 2006-7.

Building firms have been buoyed by initiatives including the UK government’s recently-extended Help to Buy programme and its Scottish equivalent.

Tim Moore, senior economist at Markit, said the latest figures suggest at least 45,000 new housing starts per quarter.

He said: “While there looks to have been a further steep upturn in new housebuilding starts in April, the trend remains well short of estimated increases in underlying demand each year.

“Set against the tightening supply chain backdrop, a difficult challenge lies ahead for housebuilding to make sure it doesn’t hit a brick ceiling.”

April figures point to a steep rise in construction sector employment, which extends the current period of job creation to 11 months. Increased payroll numbers were widely attributed to greater output and confidence about the outlook for business activity.

The latest survey indicated that construction firms’ confidence in the business outlook was only slightly lower than the seven-year high posted in March.