Construction slowdown seen in June according to latest PMI

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Figures reveal a construction slowdown last month, with the Purchasing Managers’ Index falling lower than expected

The latest Purchasing Managers’ Index (PMI) suggests a construction slowdown was seen last month.

According to the figures, June hit 54.8, which was down from 56 in May and was lower than the forecast figure of 55. While the dip might be a concern, it is also worth noting any reading above 50 is indicative the sector is growing and not in contraction.

Caution in the sector

The survey, which is compiled by IHS Markit, showed a slowdown in housebuilding, commercial, and civil engineering. Furthermore, confidence in the sector fell, hitting the lowest levels seen this year to date.

Tim Moore, senior economist at IHS Markit said: “Survey respondents commented on renewed caution among clients, in response to heightened political and economic uncertainty.”

The construction industry accounts for around six per cent of UK GDP, coming in just behind manufacturing at 10 per cent. Figures from the Office for National Statistics found that while the wider economy slowed to 0.2 per cent GDP growth in Q1 2017, the building sector saw growth of 1.1 per cent.

“The average level of the PMI in Q2 is consistent on past form with quarter-on-quarter growth in construction output of about 0.5 per cent in Q2,” said Samuel Tombs, economist at Pantheon.

“The official measure of output in April, however, was 1.5 per cent below its Q1 average, so unless the data are revised significantly the construction sector likely dragged on GDP growth in Q2.”

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