Slowdown in construction sector as new orders dry up

Construction activity slowed down last month, with the housing and civil engineering sectors contracting, according to a survey of purchasing managers at more than 170 construction companies.

Overall activity, as measured by the Markit/Cips purchasing managers' index, fell to 50.1, only marginally above the 50 point mark that separates expansion from contraction, and below the 52.6 reading for August. The result was also the lowest since December, with residential construction showing up as the weakest sector.

In another worrying sign, output was driven by work on existing contracts, as companies reported the first reduction in new business since February last year. Reflecting this, purchasing activity was also slower last month.

On the upside, the data pointed to a "marginal increase" in employment in the sector. But there were some job cuts, reflecting the fall in new orders. On the inflation front, while input costs "rose markedly", the rate of input price inflation saw a sharp slowdown.

"Construction companies continued to struggled in the face of growing concerns about the wider economy, with weaker client confidence leading to a reduction in new business received during September," Markit's Sarah Bingham said.

The grim reading chimes with new research from the accounting firm Deloitte, which said the number of property and construction companies falling into administrations had shot up by 11 per cent between July and September, jumping to 117 from 105 in the same period last year.