2019.04.0204:58:00UTC+00UK Construction Activity Continues To Fall

UK construction sector continued to shrink in March, albeit at a slightly slower pace, driven by sustained weakness in commercial work and civil engineering, survey data from IHS Markit showed on Tuesday.

The CIPS construction purchasing managers' index, or PMI, rose to 49.7 in March from 49.5 in February, in line with economists' expectations. However, a reading below 50 suggests decline in activity.

The sustained decline in total construction activity represented the first back-to-back fall in output levels since August 2016, IHS Markit said.

Commercial construction was the worst performing area in March with business activity dropping to the greatest extent since March last year.

The Brexit uncertainty and concerns about the domestic economic outlook apparently led to risk aversion among clients.

Civil engineering activity declined in March, but at a slower pace compared to February.

Meanwhile, residential building grew in March at the strongest pace, albeit modest, seen thus far this year.

Growth in new work and employment remained subdued as firms were reluctant to make major spending decisions amid the uncertainty linked to Brexit and also due to intense competition.

As seen in the manufacturing PMI survey, stock-building efforts by firms as part of their Brexit preparations, boosted purchasing activity. However, low stocks and stretched capacity among vendors resulted in markedly longer suppliers' delivery times.

Input price inflation accelerated sharply to its fastest level since November, thanks to higher raw material costs due to a weak sterling exchange rate and shortage.

Despite the troubles, business optimism rose from a four-month low in February, but remained subdued as economic and political uncertainty weighed on expectations for the next 12 months.

"Fears that the recent weakness of the UK construction sector may not be just a blip, but a sustained soft patch, were further fueled by latest data," IHS Markit economist Joe Hayes said.

"It is unlikely that next month will bring about any positive news given the challenges of a weaker UK economy, volatile pound and intense competition for new orders, as Brexit continues to cast a long shadow over the sector's future," CIPS Group Director Duncan Brock added.