Slowdown in building sector fuels calls for Bank action

Weaker construction survey in May makes the case for another round of stimulus at today's meeting

Pressure has increased on the Bank of England to announce more stimulus today to boost the UK economy, after a key survey pointed to a weakening construction sector. The Markit/Cips survey of purchasing managers for May showed the slowest growth in the building industry for three months and a pronounced downturn in confidence.

The PMI index fell from 55.8 in April to 54.4 last month, with any figure over 50 signalling expansion, while the index of positive sentiment fell to its lowest level since last October.

About a third of respondents thought their output would increase over the next 12 months, while a fifth expected a contraction. The resulting balance signalled that the degree of positive sentiment about future business was at its lowest level in six months.

Howard Archer, the chief UK economist at IHS Global Insight, said: "This is undoubtedly a disappointing survey that raises concerns about the current health of the construction sector and its near-term prospects at least."

At its May meeting the Bank of England's nine-member Monetary Policy Committee voted eight to one against extending its £325bn quantitative easing programme, despite the UK slipping into its first double-dip recession since the 1970s. The MPC is due to announce the decision of its June meeting at midday today.

A host of economic data in recent weeks has pointed to a further weakening of the economy. Last week's Markit/Cips survey of the manufacturing sector pointed to the biggest collapse in activity since the bankruptcy of Lehman Brothers in 2008 and the second-largest drop in the survey's 20-year history.

There has been a divergence this year between the picture painted by industry surveys of the construction sector and the official data. The Markit/Cips survey showed output hitting a two-year high in March. Yet figures from the Office for National Statistics showed that construction was one of the sectors that dragged the UK into a new recession this year, after shrinking by 4.8 per cent over the first quarter of 2012.

The MPC said earlier this year that it was inclined to attach more weight to the survey data, but with that now weakening too, City analysts are increasingly expecting more stimulus, if not tomorrow, then in the coming months.

ONS figures show that sharp cuts in state infrastructure spending are responsible for the contraction in the construction industry. In May the CBI called on the Government to underwrite new infrastructure projects to encourage the private sector to invest.

Tim Moore, a senior economist at Markit, said the latest construction survey suggested weakening expectations. "This reassessment of the year-ahead outlook represents worries within the construction sector that weakening economic conditions could leave firms running on empty again, once existing projects have come to completion," he said.

At its last meeting eight members of the MPC, including the Governor, Sir Mervyn King, voted to keep the QE asset purchase scheme on hold. David Miles, an external member, voted to extend it by £25bn.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence