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Financial News: UK Construction Contracts At Fastest Pace In More

UK Construction Contracts At Fastest Pace In More Than A Decade

07/02/2019 - 08:34:00 (RTTNews)

(RTTNews) - The UK construction sector contracted the most in more than a decade in June largely reflecting risk aversion among clients in response to political and economic uncertainty, survey data from IHS Markit showed Tuesday.

House price inflation slowed to a four-month low in June and remained below 1 percent for the seventh month in a row, according to the Nationwide Building Society.

The IHS Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index fell sharply to 43.1 in June from 48.6 in May, while it was forecast to rise to 49.2.

The score has been below 50 no-change mark for the fourth time in the last five months. The latest reading signaled the steepest reduction in overall construction output since April 2009.

All three broad categories of activity logged a decline in output. The fall in house building was the biggest reported for three years.

Commercial work fell for the sixth consecutive month in June, with the latest reduction in work steepest since December 2009. Respondents cited Brexit uncertainty and subsequent delays to project starts.

Civil engineering activity declined at the sharpest pace since October 2009 as domestic political uncertainty, delays to new projects and longer wait times for infrastructure contract awards acted as a brake on activity.

The survey showed that overall incoming new business fell at the fastest pace for just over 10 years due to a lack of tender opportunities as political uncertainty encouraged a wait-and-see approach to spending decisions.

Demand for construction staff was relatively resilient in June as there was only a slight fall in workforce numbers. Input cost inflation was the slowest since May 2016.

Finally, overall business optimism towards the outlook for construction work remained subdued, with confidence holding close to May's seven-month low.

"A lack of clarity from policymakers has amplified the poor performance in June," Duncan Brock, group director at the CIPS, said. "Swift decision-making and a break in the political impasse hold the key to pulling the construction sector out of the quicksand."

Nationwide data today showed that UK house prices increased at a slightly slower pace of 0.5 percent year-on-year in June, following a 0.6 percent increase in May. This was the weakest growth in four months but faster than the expected increase of 0.2 percent.

On a monthly basis, house prices edged up 0.1 percent, in contrast to a fall of 0.2 percent a month ago.

Housing market trends are likely to continue to mirror developments in the broader economy, Robert Gardner, Nationwide's chief economist, said.

"While healthy labor market conditions and low borrowing costs will provide underlying support, uncertainty is likely to continue to act as a drag on sentiment and activity, with price growth and transaction levels remaining close to current levels over the coming months," the economist added.

In the second quarter, house prices advanced 0.6 percent after gaining 0.4 percent in the first quarter.

Prices decreased in London for the eighth quarter in a row. However, the annual pace of decline moderated to 0.7 percent from 3.8 percent last quarter.

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