Construction falls at fastest rate in more than three years

British construction activity fell at the fastest rate in nearly three and a half years last month, the latest Markit/CIPS Construction PMI survey has found.

The index sank to 49.0 in August, from 50.9 in July - its second lowest reading since February 2010 and the sharpest drop since April 2009.

A reading above 50 represents growth in activity, while a reading below represents contraction.

Markit said the August data pointed to a “renewed downturn in UK construction output and another reduction in new order volumes, highlighting an ongoing deterioration in business conditions across the sector”.

“The marginal decline in overall output reflected lower levels of business activity in all three broad areas of the construction sector.”

The survey found that residential building activity was the worst performing category of construction output, while commercial construction activity also fell for the first time in two-and-a-half-years. The survey also recorded a “solid reduction” in civil engineering activity.

Markit said: “Anecdotal evidence from survey respondents attributed the drop in construction output to ongoing weak demand across the sector. This was highlighted by a decrease in new order intakes for the third consecutive month during August.

“Moreover, the latest fall in new business volumes was the fastest since April 2009. Construction firms cited lower spending patterns among both public and private sector clients in August.”

Tim Moore, senior economist at Markit said: “August data reaffirms that UK construction firms are suffering a prolonged downturn in new work and there is little evidence to suggest an imminent rebound in output levels.

“This has been the pertinent message from the UK Construction PMI surveys throughout the summer, and most worryingly the latest drop in new orders was the fastest since the sector was in full scale retreat in early 2009.

“A construction decline for 2012 overall is statistically baked in the cake. To bring output for the year as a whole up to the total level seen in 2011 would require a rather implausible double-digit growth surge in each of the final two quarters.

“Therefore, an important issue is simply whether a floor has yet been established, and the survey evidence at this stage seems to suggest it hasn’t.

“Indeed, output dropped in August at the second-fastest rate since the snow-affected month of February 2010, with commercial activity even joining the housing and civil engineering sectors in contraction for the first time in two-and-a half-years.”