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.
- 1 Mystery of the Siberian holes at the end of the world 'solved': Scientists offer explanation
- 2 Pope Francis issues top 10 tips for happiness
- 3 Disney heiress Abigail disowns her share of family profits in West Bank company
- 4 Israel's propaganda machine is finally starting to misfire
Lost portraits of the Somme: 100 images of Tommies posing before they went over the top. Now can you help to identify them?
Mystery of the Siberian holes at the end of the world 'solved': Scientists offer explanation
Pope Francis issues top 10 tips for happiness
Sabina Altynbekova, the girl branded 'too good looking' for volleyball, says social media obsession with her is a 'bit much'
Ashley Cole tweets unsettling meme of him stalking ex-wife Cheryl Cole and new husband Jean-Bernard Fernandez-Versini
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
- < Previous
- Next >
iJobs Money & Business
£300 - £350 per day: Orgtel: Financial Analyst, Forecasting, Halifax, Banking,...
£500 per day: Orgtel: Business Architect - Banking - Bristol - £500 per day A...
£200 - £500 per day + competitive: Orgtel: I am currently working on a large p...
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...