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UK building industry contracted last month, survey finds

The UK construction industry unexpectedly shrank in August as new orders dropped at the fastest pace since April 2009, Markit Economics has said.

An index based on a survey of purchasing managers fell to 49 from 50.9 in July, Markit and the Chartered Institute of Purchasing and Supply said, in a statement on Markit's website yesterday.

The median estimate in a Bloomberg News survey of 12 economists was for a reading of 50, the dividing line between growth and contraction.

The report adds to evidence that the recession extended into the third quarter, with data yesterday showing Markit's manufacturing index held below 50 for a fourth month in a row.

The Bank of England will probably decide at its policy meeting this week to continue the £50bn ($63bn) programme of gilt purchases it started in July.


"UK construction firms are suffering a prolonged downturn in new work and there is little evidence to suggest an imminent rebound in output levels," Tim Moore, senior economist at Markit, said in the statement. "A construction decline for 2012 overall is statistically baked in the cake."

The pound pared some of its gains against the dollar after the report, falling as much as 0.1pc.

The decline was biggest in residential construction, and civil engineering activity contracted for a third month, the report said. Commercial construction fell for the first time in two-and-a-half years.

Persimmon Plc, the UK's largest homebuilder by market value, said last month that the UK housing market "remains constrained by the reduced availability of mortgage credit" and will "remain challenging reflecting the wider issues within the economy."

UK retail sales fell in August for the first time in four months as the 2012 Olympic Games kept shoppers away from London, the British Retail Consortium said yesterday. Sales at stores open at least 12 months, measured by value, dropped 0.4pc from a year earlier, the London-based trade group said.

The Bank of England will probably hold its target for bond purchases at £375bn (€476bn), according to the median estimate of 39 economists in a Bloomberg News survey.

Policy-makers will also hold the key rate at a record low of 0.5pc, according to all 51 economists in a separate poll. The decisions will be announced at noon tomorrow. (© Bloomberg)

Irish Independent