UK construction weakest in six months

LONDON Thu Jan 3, 2013 9:33am GMT

Workers construct residential homes at a building site in north London September 6, 2012. REUTERS/Neil Hall

Workers construct residential homes at a building site in north London September 6, 2012.

Credit: Reuters/Neil Hall

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LONDON (Reuters) - British construction output contracted at the fastest rate in six months in December, driven by a steep reduction in house building, a survey showed on Thursday.

The Markit/CIPS Construction Purchasing Managers' Index fell to 48.7 last month from 49.3 in November, unexpectedly dipping further below the 50 level that separates growth from contraction. Economists had forecast a reading of 49.5.

The index is now at its lowest since June, when unusually poor weather and extra public holidays dented output.

"December rounded off a miserable year for the UK construction sector," said Tim Moore, senior economist at Markit and author of the survey, noting weak underlying demand.

Residential building shrank at the fastest pace since December 2010 when heavy snow disrupted construction.

"Survey respondents are also relatively subdued about the 2013 outlook amid reports from their clients that budgets will be under even greater pressure over the year ahead," Moore said.

According to the PMI, British construction output contracted in two of the three final months of 2012, dampening hopes that the sector will boost the economy in the fourth quarter.

Although construction accounts for less than 7 percent of Britain's GDP, weak activity in the sector was the main drag on the economy this year, helping tip the country into its second recession since the financial crisis.

(Reporting by Olesya Dmitracova; editing by Ron Askew)

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