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Construction data raises recession fears Construction data raises recession fears
(7 months later)
Fears that Britain will slide into a triple-dip recession this quarter heightened on Monday after the latest snapshot of the construction sector showed output dropping at its fastest rate in more than three years.Fears that Britain will slide into a triple-dip recession this quarter heightened on Monday after the latest snapshot of the construction sector showed output dropping at its fastest rate in more than three years.
The news will pile pressure on to chancellor George Osborne to announce new measures to support the construction industry at the budget later this month.The news will pile pressure on to chancellor George Osborne to announce new measures to support the construction industry at the budget later this month.
It will also strengthen the belief that the Bank of England will increase its quantitative easing programme or announce new measures to boost the economy when it meets this week. The pound fell to $1.50 after the release, although that is still higher than two-and-a-half year low it hit following dire manufacturing data out last week.It will also strengthen the belief that the Bank of England will increase its quantitative easing programme or announce new measures to boost the economy when it meets this week. The pound fell to $1.50 after the release, although that is still higher than two-and-a-half year low it hit following dire manufacturing data out last week.
The monthly survey from CIPS/Markit showed that the closely watched Purchasing Managers' Index for construction dropped from 48.7 to 46.8 in February – its lowest level since October 2009. Analysts had been expecting an improvement to 49, but instead the index fell further below the 50 level that separates a sector that is expanding from one that is contracting.The monthly survey from CIPS/Markit showed that the closely watched Purchasing Managers' Index for construction dropped from 48.7 to 46.8 in February – its lowest level since October 2009. Analysts had been expecting an improvement to 49, but instead the index fell further below the 50 level that separates a sector that is expanding from one that is contracting.
Despite making up less than 7% of Britain's economy, weak construction output was the main drag on growth last year. Monday's release follows data that showed a surprise drop in manufacturing output last month and will fuel concerns that UK is headed for its third recession since the financial crisis.Despite making up less than 7% of Britain's economy, weak construction output was the main drag on growth last year. Monday's release follows data that showed a surprise drop in manufacturing output last month and will fuel concerns that UK is headed for its third recession since the financial crisis.
The UK economy shrank by 0.3% in the final three months of 2012; if output falls again in the first three months of 2013, Britain will officially drop into an unprecedented triple-dip.The UK economy shrank by 0.3% in the final three months of 2012; if output falls again in the first three months of 2013, Britain will officially drop into an unprecedented triple-dip.
The decline in construction was driven by a sharp fall in civil engineering activity and falling levels of commercial building work. David Noble, chief executive at the Chartered Institute of Purchasing & Supply, said: "There is barely a crumb of comfort in this month's figures for the construction industry to ease the continued decline in performance. The dramatic fall in civil engineering activity is particularly worrying, having been the one bright spot in the second half of 2012.The decline in construction was driven by a sharp fall in civil engineering activity and falling levels of commercial building work. David Noble, chief executive at the Chartered Institute of Purchasing & Supply, said: "There is barely a crumb of comfort in this month's figures for the construction industry to ease the continued decline in performance. The dramatic fall in civil engineering activity is particularly worrying, having been the one bright spot in the second half of 2012.
"With little in sight to improve the sector's fortunes, all eyes will be on the chancellor to do something to prevent further decline in the sector as we approach the budget later in the month.""With little in sight to improve the sector's fortunes, all eyes will be on the chancellor to do something to prevent further decline in the sector as we approach the budget later in the month."
One bright spot was an increase in housebuilding for the first time since May. The number of people in construction work also rose fractionally in February, after falling over the final three months of 2012.One bright spot was an increase in housebuilding for the first time since May. The number of people in construction work also rose fractionally in February, after falling over the final three months of 2012.
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