Bloomberg News

U.K. April Construction Shrinks Less Than Forecast, Markit Says

May 02, 2013

U.K. construction shrank less than economists forecast in April as homebuilding strengthened, Markit Economics said.

An index of activity rose to 49.4 from 47.2 in March, Markit and the Chartered Institute of Purchasing and Supply said today in London. Economists forecast a reading of 48, based on the median of nine estimates. Still, the index remained below the 50 level that divides expansion and contraction for a sixth month. The report also showed that new business fell for an 11th month, the longest period of decline since 2008-2009.

Construction was one of the main weak spots of Britain’s economy in the first quarter, according to preliminary data published last month. While the economy grew 0.3 percent, construction shrank 2.5 percent and knocked 0.2 percentage points off gross domestic product. Markit said the April survey indicates construction may be less of a drag this quarter.

“The sector showed signs of stabilization in April,” said CIPS Chief Executive Officer David Noble. “This is a reasonable signal that things are a bit better in the industry but, that said, construction is still contracting and witnessing marginal declines in new orders.”

Employment in the construction industry was “broadly stable” in April and input costs rose at the slowest pace since June, Markit said. Housing activity was the strongest since April 2012. More than twice as many builders anticipate an increase in their output over the next twelve months as those that forecast a reduction, according to the report.

Manufacturing Index

A report yesterday by Markit showed that manufacturing barely shrank in April, with a factory index rising to 49.8 from 48.6. Services (PMITSUK) probably maintained growth last month, economists said before a third report scheduled for release tomorrow. The services gauge probably stayed at 52.4, according to the median of 27 forecasts in a Bloomberg survey.

In the euro area, manufacturing contracted for a 21st straight month in April, adding to pressure on the European Central Bank to cut interest rates to spur lending and growth. A factory gauge for the 17-nation region declined to 46.7 from 46.8, Markit said today. That’s above an initial estimate of 46.5 on April 23.

The ECB’s Governing Council will cut its benchmark rate today to a record low 0.5 percent from 0.75 percent, according to the median of 70 economists’ estimates in a Bloomberg survey.

The Bank of England, which kept its bond-buying stimulus program on hold last month, will hold its next policy meeting on May 8-9. BOE official Ben Broadbent said yesterday there are more reasons to be optimistic about the economy than there were last year.

“If you ask me are there signs other than just our forecast that the economy is going to grow over the next six months, I’d say yes, and there are probably more of those signs than in the middle of last year,” he told reporters in London. Still, the recovery is “a lot weaker than a normal recovery and weaker than even the average.”

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

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


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