U.K. Construction Shrinks for a Second Month as Demand Slumps

U.K. construction output shrank for a second month in September as new business slumped, marking the first back-to-back contraction in almost three years.

An index of activity rose to 49.5 from 49 in August, Markit and the Chartered Institute of Purchasing and Supply said in a statement today. That’s less than the 49.9 median estimate of 12 economists in a Bloomberg News survey. A reading below 50 indicates contraction.

The report adds to evidence of an uneven recovery in the third quarter after a survey yesterday showed a manufacturing slump deepened in September. Bank of England Markets Director Paul Fisher said last week that growth in the three months through September will be “very strong” after a recession continued in the second quarter. Policy makers may maintain their bond-purchase plan this week as they assess signs of growth alongside the crisis in Europe, a Bloomberg survey shows.

“There is little to be positive about,” CIPS Chief Executive Officer David Noble said. “In the absence of investment of some kind, we are likely to see this level of activity continue for some time, or possibly even drop further.”

Markit said the decline in new business was the second sharpest since April 2009. A drop in home building was the “most marked” since December 2010, while commercial construction fell the fastest in more than 2 1/2 years. Civil engineering grew for the first time in four months.

London-based Barratt Developments Plc (BDEV), Britain’s largest homebuilder by volume, said on Sept. 12 that there is “ongoing economic uncertainty in the U.K. market.”

An index of manufacturing fell to 48.4 last month from 49.6 in August, Markit said yesterday. Services growth probably cooled in September, economists said before a report tomorrow. That gauge will decline to 53 from 53.7, according to the median of 29 estimates.

The Bank of England will announce its latest policy decision on Oct. 4. It will hold its bond-purchase target at 375 billion pounds ($606 billion), according to all 40 economists in a Bloomberg survey. Policy makers will also hold the key interest rate at a record low of 0.5 percent.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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