‘Beast from the East’ tears through UK construction in March

LONDON (Reuters) – The UK construction industry seized up due to heavy snow last month, prompting the biggest drop in activity since just after 2016’s Brexit vote, an industry survey showed on Wednesday.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) slumped to 47.0 from 51.4 in February.

It was a bigger decline than had been predicted by any economist in a Reuters poll, which on average pointed to a modest drop to 50.8. The 50-point line divides expansions in activity from contractions.

Last month, an unusual Siberian weather system that British meteorologists dubbed “the Beast from the East” brought snow, strong winds and the coldest temperatures in several years to much of Britain and elsewhere in Europe.

House building was little affected, but the storm clobbered other sectors, the survey showed.

Civil engineering firms suffered their biggest downturn in five years. The survey’s index for commercial work, which had recovered in January and February, staged its biggest one-month drop since 2009.

Scotiabank economist Alan Clarke said:

“The construction sector remains the problem child of the UK GDP breakdown.”

Construction makes up only about 6 percent of British economic output but is watched closely as a guide to investment and sentiment in the wider economy.

Official data show construction output declined throughout the last three quarters of 2017, with respondents in the PMI survey repeatedly citing Britain’s vote to leave the European Union as weighing on new business.

The sector could tilt the balance between a weak reading and an okay reading when first-quarter economic growth figures are released on April 27, Clarke said.

Nonetheless, Bank of England officials, who are widely expected to raise interest rates in May, are unlikely to be perturbed by a single month of weak construction figures.

A separate PMI published on Tuesday showed manufacturers shrugged off the bad weather [GB/PMIM].

There were also signs that a rebound in construction should follow in April. Optimism among construction companies reached a nine-month high in March and they hired workers at a faster pace.

On the other hand, order books contracted for a third month running, with the bad weather responsible only in part for the latest drop. Construction firms highlighted ongoing weak demand, a year before Britain is due to leave the European Union.

The PMI covering the much larger services sector is due out on Thursday.

Kindly shared by Reuters UK