Construction still in deep freeze

Construction hit a six-month low in the second half of 2012 as the downturn in the sector deepened as a result of a "sharp and accelerated" drop in new orders

Weak underlying demand caused the Markit/CIPS UK Construction Purchasing Managers’ Index index, PMI, to show the fastest rate of contraction since June 2012, dropping to 48.7 in December from 49.3 in November.

Poor weather was also blamed as causing longer than expected seasonal breaks at the end of the year.

December was the seventh month in a row that volumes of incoming work had fallen and the contraction in new orders was the fastest since April 2009.

The PMI - which measures overall output in the sector - has now posted below the neutral 50.0 mark in four of the past five months.

Housing was the weakest performer of the three construction categories monitored by the survey in December, with the strongest pace of contraction in residential building since the snow-related drop in December 2010.

Commercial activity also fell in December for the fifth straight month, but civil engineering bucked the overall trend by posting another moderate expansion.

David Noble, chief executive of the Chartered Institute of Purchasing & Supply, said: “Confidence in the construction sector is now lower than the four year post-recession average, reflecting the poor performance of the sector in the final month of 2012. December witnessed the fastest decline in output in six months and a huge drop in new business, signalling trouble for the year ahead.

“Construction in housing is particularly desperate having experienced the fastest decline in two years, with the current period of contraction now lasting seven months in a row. Commercial housing activity has also continued to fall, albeit at a slower rate, leaving civil engineering as the only sector recording growth in the industry.

“Continued increases in business costs, alongside low stocks at suppliers and longer delivery times complete a depressing picture for the construction sector going into 2013, making it hard to see where a change in fortunes might come from.”