The pace of decline in UK construction activity accelerated again in June - a key survey showed yesterday - prompting another warning of the danger of a w-shaped recession.
The pace of decline in UK construction activity accelerated again in June - a key survey showed yesterday - prompting another warning of the danger of a w-shaped recession.
The Chartered Institute of Purchasing and Supply's purchasing managers' index for construction dropped from 45.9 in May to 44.5 in June - moving further away from the level of 50 which separates expansion from contraction. Although this decline followed three consecutive monthly increases in CIPS' construction PMI, the index is well above a February figure of 27.8 which is the lowest since the survey began in 1997.
UK construction sector output has now declined for 16 consecutive months.
In June, housebuilding, commercial property construction, and civil engineering activity all again registered monthly declines.
Employment in the construction sector continued to plummet, and the pace of job-shedding accelerated slightly between May and June.
David Noble, chief executive officer of CIPS, said: "Against the backdrop of difficult market conditions, the UK construction sector is on a knife-edge. After the improvements (slower rates of decline) seen in April and May, the sector has retracted as firms battle to consolidate their position in the tough market. This data adds to speculation of a w-shaped recession.
"With conditions worsening, particularly in the housing and commercial sub-sectors, competition between firms remained fierce and many were forced to cull jobs."
However, he added: "The sector is in better shape than at the start of the year. Moreover, though purchasing managers say current contracts are drying up and the new business horizon looks sparse, they are still resolute that wider economic recovery will materialise over the coming 12 months."
Paul Smith, senior economist at financial information company and survey sponsor Markit, said: "The latest data continue to highlight the fragility of the construction sector.
Activity continues to fall markedly, amid ongoing difficulties amongst companies in securing new business, while jobs continue to be cut at a severe rate."
However, he added: "Some positives may be taken from the survey. Though historically marked and slightly faster in June, the rate of contraction was again much slower than those (rates) seen in Q1."
He predicted that the sector would, therefore, prove to have been much less of a drag on overall UK economic output in the second quarter than it was in the opening three months of this year.
A 6.9% decline in UK construction output during the first quarter played a signifi- cant part in this week's revision by the Office for National Statistics of the UK's first-quarter rate of decline, from 1.9% to 2.4%. This 2.4% drop is the steepest quarterly tumble since 1958.
Separate data yesterday from the ONS showed UK construction orders in the three months to May were down just 1% on the December to February period.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "The modest deepening in the contraction in construction activity in June evident in the purchasing managers' survey highlights the fact that the sector still faces very difficult conditions, even though the situation has improved appreciably since the first quarter "Overall, the evidence suggests that the worst of the contraction is over for the construction sector, but it is still very fragile. The sector is being helped to a limited extent by the government bringing forward some infrastructure spending as part of its efforts to boost the economy."
