Stagnation for builders with new orders down

The Markit/Cips purchasing managers’ index for construction fell to 50.1, just above the point that separates expansion from contraction, from 52.6 in August. Yesterday’s reading was the lowest for the index since a contraction in December 2010.

Sarah Bingham, an economist at Markit, said a slowdown in new orders was behind the lower output and added that in some areas projects were being cancelled or delayed because of weak client confidence.

“Activity growth slowed to near-stagnation, with constructors relying on work on existing contracts to support output. This therefore bodes ill for construction activity in the coming months,” she said.

Both housing and civil engineering output fell in September, according to the survey, though commercial output increased.

Howard Archer, chief UK and European economist at IHS Global Insight, said it was notable that house building activity contracted for a fourth month running, and at a markedly increased rate, which is “undoubtedly a reflection of extended weak housing market activity and soft prices”.

The Markit survey mirrors recent official figures showing new orders fell by 16.3 per cent in the second quarter to their lowest level since 1980. The reading also chimes with a report earlier this week from the Federation of Master Builders, which said small building companies in Scotland were seeing business decline at an accelerating rate.

The weak construction figures contrast with surprisingly solid growth from the manufacturing sector in September, and come at a delicate time for Britain’s economy as the Bank of England considers at tomorrow’s meeting of the monetary policy committee whether to start a second round of money printing to boost growth.

The purchasing managers’ index for the dominant services sector, published today, will provide a more substantial clue as to how Britain’s economic recovery is faring.