Construction growth slows despite housing boost

Britain's construction sector suffered a relapse during November, new data suggested yesterday, after posting a surprise gain in October.

Data compiled jointly by Markit and the Chartered Institute of Purchasing and Supply suggests that the construction sector at least continued to grow during November – in contrast to other parts of the economy – but at a slower pace. The Markit/Cips PMI index stood at 52.3 during November – a value above 50 indicates growth – down from 53.9 in October, a reading that had surprised economists for its strength.

Despite the slowdown in the rate of growth, there was a small increase in activity in the residential construction market, which will be seen as good news, given the headwinds that have buffeted housebuilders over the past six months.

David Noble, the chief executive of Cips, said construction companies faced a number of difficult challenges. "Raw materials, energy and fuel prices continue to hinder the sector," he warned.

"Construction companies cite these as the main contributing factors for high input prices which have increased for the 22nd month running."

Howard Archer, the chief UK economist at IHS Global Insight, said the construction data was better than might have been expected.

"It is actually a relief in the current environment to see any evidence that part of the economy is growing at the moment. Even so, it needs to be borne in mind that latest hard data shows that construction output declined 0.2 per cent in the third quarter, which was the third drop in four quarters and left output down 3.6 per cent year-on-year," he said.

"Evidence of modest-growingconstruction activity in November does not hugely dilute fears that the economy could contract in the fourth quarter of the year."