Jul 06, 2022 04:40AM ET
By: AnalysisWatch
Activity in the UK's construction sector slowed sharply last month, recording its weakest growth since September 2021, as fears about the economic outlook led housing starts to fall for the first time since the COVID-19 pandemic began.
The S&P Global Purchasing Managers' Index (PMI) for the construction sector fell to 52.6 in June from 56.4 in May, a much sharper decline than the 55.0 forecast in a Reuters poll of economists.
The decline was led by a drop in the residential construction component below the 50 mark, separating growth from contraction for the first time since May 2020. Commercial construction also "lost significant momentum" as firms curtailed spending.
The downturn in construction contrasts with a steadier picture for the economy as a whole. The cross-sector PMI, which includes services and manufacturing as well as construction, rose to 53.6 in June from 53.4 in May.
Tuesday's PMI data had shown a pick-up in activity among service firms, but rising inflation weighed on new orders, which rose at the slowest pace since early 2021.
Construction new orders showed moderate growth, but some firms noted a lack of new orders to replace completed projects due to economic uncertainty and inflation concerns.
The Bank of England expects consumer price inflation, already at a 40-year high of 9.1%, to top 11% in October and is widely expected to raise interest rates further.
Mortgage lender Nationwide last week noted "tentative" signs of a slowdown in the UK housing market, which boomed during much of the pandemic as richer households sought more spacious accommodation.
The latest official data for April showed the first fall in construction output in six months, 3.3% above pre-pandemic levels.