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U.K. Construction Shrinks Most Since October 2009


The British construction activity declined at the sharpest pace since October 2009 on solid reduction in output and new works, a survey by Markit Economics showed Monday.

The Markit/Chartered Institute of Purchasing & Supply Purchasing Managers' Index fell to 46.8 in February from 48.7 in January. Economists had forecast the index to rise to 49. Readings below 50 suggests contraction of the sector.

The marked fall in construction output reflected a return of declining levels of commercial building work and a sharp decrease in civil engineering activity.

Commercial construction decreased at the steepest pace for just over three years, while the latest reduction in work on civil engineering projects was the fastest since October 2009. This was offset by an increase in housing activity.

The latest PMI survey is confirmation that January's construction decline was not entirely snow-related, Tim Moore, senior economist at Markit said.

Downward pressure on client budgets, alongside subdued public sector spending, again led to lower output levels and reduced new order inflows, he added.

Firms reported lower levels of new work in each month since last June, reflecting cuts to client budgets and intense competition. Nonetheless, employment numbers increased fractionally in February.

Reduced new business volumes contributed to a further notable decrease in purchasing activity at construction companies. Supplier delivery times lengthened again in February, largely due to lower stocks at suppliers.

Looking ahead, companies expect an expansion of business activity over the coming year, with the degree of positive sentiment the strongest since last April.

The economy contracted 0.3 percent in the fourth quarter, despite an expansion in construction output. But today's survey offers little hope of recovery in the first quarter even by the construction sector.

Overall, with the wider economic backdrop still very fragile, 2013 remains likely to be another sluggish year for occupier demand, property construction and rents, Kelvin Davidson, property economist at Capital Economics said.

by RTTNews Staff Writer

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