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Residential slowdown hits construction activity in March

Construction activity remained flat in March after the residential sector grew at its slowest rate for three years.

Data from the Markit/CIPS construction PMI, which measures activity in the construction industry, showed that activity in March grew at the joint-slowest rate for more than two-and-a-half years.

At 54.2, the index level for March was unchanged since February, but was still well ahead of the 50.0 ‘no change’ level.

The stagnation in March was largely due to a slowdown in the housing market, with the latest increase in residential construction the weakest since January 2013.

This was offset by increasing growth rates in both commercial and civil engineering work; the latter has bounced back after hitting an eight-month low in December 2015.

Overall, business sentiment has remained largely positive in spite of a slowdown in the residential market. Just over half of all respondents to the PMI (51 per cent) expect a rise in business activity over the next 12 months, while only 11 per cent expect a reduction.

However, the net balance of 40 per cent was the joint-lowest level of business confidence since December 2014.

Hiring levels also showed signs of slowing down, with employment growth easing to its slowest rate since June 2013.

Suppliers’ delivery times increased again in March, but cost inflation slowed for the second month in a row, falling to its lowest rate since February 2010.

Commenting on the data, Markit senior economist Tim Moore said: “Heightened uncertainty about the business outlook appears to have weighed on overall construction demand so far in 2016, with survey respondents citing cautious client spending patterns and a reduced willingness to commit to new projects.

“As a result, volumes of new work disappointed in March as order book growth slipped for the third month in a row and reached its weakest since the pre-election blip last year.”

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