UK construction sector is set to revive in the fourth quarter after a slump in the previous three months, as activity is likely to remain underpinned by low interest rates and high property prices, Pantheon Macroeconomics said.
“But construction output accounts for only 6 percent of GDP, so it isn’t going to prevent the overall recovery slowing as the fiscal squeeze intensifies and the stronger pound crimps exports,” Pantheon Macroeconomics Chief UK economist Samuel Tombs said in remarks on the latest construction purchasing managers index data, released Tuesday.
In the third quarter, construction output tumbled 2.2 percent, marking its first decline since early 2013 and the biggest fall in three years. Economic growth eased to 0.5 percent from 0.7 percent in the previous quarter.
The Markit/CIPS construction PMI fell to 58.8 in October from 59.9, in line with expectations. Tombs pointed out that the fall in the PMI reversed less than half of September’s rise and it remained above its 58.2 average of the previous 12 months.
The rise in both the future activity and new order indexes, the latter to a 12-month high, points to further near-term strength, the economist added. The survey also showed that the construction sector recovery continues to be fueled by strong growth in house-building, although there was faster growth in commercial construction.
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