British construction PMI sees sudden collapse

Written on:September 4, 2012
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Construction activity

Construction PMI fell to 49 in August

Britain’s construction activity fell suddenly in August, as new orders hit rock bottom since the height of the 2008 financial crisis, dashing George Osborne’s revival plans.

The Markit/CIPS construction Purchasing Manager Index (PMI) dropped to 49.0 in August from 50.9 in July. This was below economists’ expectations of a smaller drop to 50.0 and the lowest reading since June, when activity level was affected by an extra public holiday and bad weather.

The main drag on the economy was the sector’s contraction by nearly 10% in the first half of 2012. “August data reaffirms that UK construction firms are suffering a prolonged downturn in new work and there is little evidence to suggest an imminent rebound in output levels”, said Tim Moore, senior economist at survey compiler Markit, adding, “Most worryingly, the latest drop in new orders was the fastest since the sector was in full scale retreat in early 2009.”

the government has introduced many initiatives to revive the ailing economy but to no avail. The government has pledged to fund £50 billion worth of infrastructure and house building investment through state guarantees.

Moore said that construction output fell at the second-fastest rate in August since February 2010, with commercial activity going down along with housing and civil engineering sectors in contraction for the first time in two-and-a half-years.

However, on Monday, a strong rebound tickled the manufacturing PMI which triggered hope that the economy may finally move out of recession in the third quarter.

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