-Output declines during August amid marked fall in new work
-Commercial activity drops for first time in two and-a-half years
-Construction companies least optimistic about business outlook since October 2011
The Markit/CIPS construction sector index fell to 49 points in August, from 50.9 during the month before, its second-lowest since February 2010.
The consensus forecast was for a reading of 50.
Residential building activity was the worst performing category of construction output monitored by the survey in August, although activity levels also contracted in civil engineering and even in the commercial construction space.
Significantly, the fall in new business volumes was the fastest since April 2009, with construction firms citing lower spending patterns among both public and private sector clients in August.
Employment levels are said to have stagnated in August, as UK construction companies indicated that their business confidence weakened for the fourth time in the past five months during August.
Meanwhile, the latest data signaled a robust and accelerated pace of input price inflation in the construction sector, with the latest rise in cost burdens the fastest since March even as delay at suppliers mounted.
Large projects face risk of cancellation
Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI, says:
"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.
"(...) 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."
For his part, Dr. Howard Archer, Chief UK Economist at IHS Global Insight, comments that: "(...) In particular, the government's spending cuts are limiting overall expenditure on public buildings, schools and hospitals. For example, the Bank of England's regional agents revealed in their August business conditions survey that "construction output continued to contract. largely due to the dwindling pipeline of public sector work.
"On top of this, house building activity is likely to be constrained by persistently weak housing market activity, soft prices and a still uncertain outlook.
"And if the economy continues to struggle to develop sustainable growth over the coming months, there is the danger that construction activity will be hit by some projects being put on hold or cancelled altogether - particularly large ones (...)."