March 2, 2016 / 9:35 AM / a year ago

UK construction growth at ten-month low, housebuilding weak

2 Min Read

Construction cranes surround 20 Fenchurch Street, nicknamed the Walkie-Talkie building, during sunrise in the financial district of London, Britain February 16, 2016.Hannah McKay

LONDON (Reuters) - Growth in Britain's construction industry unexpectedly dipped to a 10-month low in February, a survey published on Wednesday showed, adding to signs of a slowdown in the economy.

The Markit/CIPS UK Construction Purchasing Managers' Index (PMI) weakened to 54.2 from 55.0, below all the forecasts in a Reuters poll of economists who had largely expected the index to rise to 55.5.

Housebuilding expanded at the slowest pace since June 2013, when Britain's economic recovery was just starting to take hold, and construction firms hired staff at the weakest rate since August that year as optimism faded.

The construction survey follows Tuesday's manufacturing PMI, which showed British factories had their weakest month in nearly three years in February.

Bank of England policymakers, who have sounded more cautious about the economy over the last couple of weeks, will be watching Thursday's services PMI carefully, given it represents by far the largest chunk of Britain's private sector economy.

"Aside from the pre-election slowdown last year, the latest upturn in construction output was the weakest for over-two-and-a-half years," Tim Moore, senior economist from survey compiler Markit, said.

Optimism among construction companies about business activity for the year ahead fell to its lowest level since December 2014.

"What's different this time around is that construction companies have cut back on employment growth in response to the uncertain business outlook," Moore said.

Construction firms purchased goods and material at the slowest pace since mid-2013. Moore described this as a sign that construction firms are preparing for an extended patch of softer growth this year.

As well as the weaker global economy, Britain's referendum on its membership of the European Union, which will take place on June 23, is likely to add to uncertainty for firms and households, economists have said.

Reporting by Andy Bruce; editing by William Schomberg

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