Growth in Britain's construction industry was broadly steady in July, avoiding a repeat of weak data surprises in manufacturing and retailing that raised fears of a further slowdown of an already feeble economic recovery.
The Markit/CIPS construction purchasing managers' index ticked down to 53.5 points in July from 53.6 points in June, beating analysts' expectations of a dip to 53.0 points.
"Following a recent flurry of disappointing surveys and data, it is actually somewhat of a relief to see construction activity expand at a similar pace in July to June," said IHS Global Insight economist Howard Archer.
"However, the construction sector is hardly storming ahead and it clearly faces a challenging environment over the coming months which is likely to limit growth prospects."
The construction industry was a major drag on economic growth over the winter, even though it accounts for only 6 per cent of economic output, and despite solid PMI surveys.
However, the sector returned to growth in the second quarter. Overall the economy barely grew between April and June, hit by a number of one-off factors. Recent surveys have indicated that the start of the third quarter was rather weak, with the manufacturing PMI showing its first contraction in two years.
The weakness of the economy is a major headache for the government, which is banking on solid growth to meet its ambitious goal to erase a budget deficit of around 10 per cent over the next four years.
The International Monetary Fund (IMF) said yesterday Britain's economy should return to a modest recovery over the coming quarters, though the government and central bank would have to react quickly to support it should growth stay weak for a longer time.
The PMI survey showed that while commercial construction and civil engineering posted growth on the month, residential construction shrank for a second month running.
The housing market has been struggling to pick up since the financial crisis and consumers are reluctant to borrow heavily to buy property despite ultra-low interest rates, as high inflation, rising taxes and meagre wage growth eat into their budgets.
Overall, construction companies were cautious about their future business.
"Rates of growth for both new orders and activity were solid, but remained below long-run trends" said Markit economist Sarah Bingham. "Furthermore, employment fell for a second month running.
"The subdued level of confidence regarding future business expectations reflects the challenging outlook for the UK economy, and therefore the construction sector," she said.
Reuters
