UK construction PMI falls to five-month low despite strong house-building

LONDON (Reuters) – The UK construction sector lost momentum in October but suffered less than the most of the coronavirus-hit economy thanks to a buoyant housing market, a business survey showed on Thursday.

The IHS Markit/CIPS Purchasing Managers’ Index for the construction sector dropped to 53.1 in October from September’s 56.8, a bigger drop than the decline to 55.0 which economists had forecast in a Reuters poll, and its lowest since May.

However, unlike figures released on Wednesday for the much larger services sector, the gauge remained well above the 50 level which separates growth from contraction.

IHS Markit economist Tim Moore said:

“The construction sector was a bright spot in an otherwise gloomy month for the UK economy during October.”

House-building was the biggest contributor to growth, reflecting a boom in demand since the end of lockdown, helped by a temporary cut in property taxes which has seen lenders approve the highest number of mortgages since 2007.

New orders in the sector, which makes up about 6% of Britain’s economy, rose by the most in five years.

The construction industry is also exempt from the four-week lockdown which started in England on Thursday — although firms last month were concerned about the potential knock-on effects on demand from rising COVID-19 cases.

Moore said:

“Survey respondents widely commented on renewed economic uncertainty and concerns about the sustainability of the recovery as pent-up demand begins to wane.”

The civil engineering sector continued to report steep declines in activity, while growth in commercial activity was fairly muted.

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