Growth in Britain's construction sector slowed in July to its weakest pace in nearly a year due to lower levels of commercial development and a softer expansion in house building.
IHS Markit's survey of purchasing managers in the UK's construction industry revealed a reduction in new business for the first time in 11 months.
Purchasing managers index (PMI)
Construction PMI fell to 51.9 in July from 54.8 in June and falling a long way short of expectations of a slight dip to 54.5.
The PMI indices pivot around a central figure of 50, at which point expansion in business activity begins. The higher above 50, the greater the pace of expansion. Conversely, a number below 50 indicates a contraction in activity.
The data was frustrating for those expecting a pick-up in the UK economy in the second half of 2017 after disappointing gross domestic product growth in the first two quarters.
Weak construction activity
Commercial building activity was the primary factor behind slowing growth in the construction sector, while residential building was the strongest performing category, even though the latest rise was the slowest in three months.
IHS Markit said that a number of the survey respondents experienced delays in decision making by clients who were worried about the economic outlook and other uncertainties linked to political instability and Brexit.
Meanwhile, price pressures from rising raw materials costs added an extra layer of concern for industry participants.
"Worries about Brexit, the UK economy and post-election uncertainty can be seen across the construction sector," said Duncan Brock at the Chartered Institute of Procurement & Supply, which co-authored the report.
Samuel Tombs at Pantheon Macroeconomics added: "The sharp fall in the construction PMI in July suggests that the renewed slowdown recorded by the official data in the second quarter won’t be short-lived."
The lower than expected construction PMI data contrasted sharply with data published on Tuesday that showed an unexpectedly robust pick-up in manufacturing activity in July.
Manufacturing PMI rose to 55.1 from 54.2 in June – accelerating for the first time in three months – boosted by new work inflows, production increases and higher employment. Analysts had expected a rise to 54.3.
The pound was higher against a broadly weaker dollar, but fell 0.1% versus the euro to €1.1175.
Stocks, however, were lower, with the FTSE 100 down 0.4% at 7,397.15 with CRH, the building materials group, down 1.8%, Barratt Developments, the house builder, down 0.7% and rival Taylor Wimpey falling 0.7%.
FTSE 250-listed building materials supplier Travis Perkins fell 2.4% after also reporting a fall in first-half profits.