Commercial building slump sparks unexpected fall in construction activity

Output in Britain's construction sector unexpectedly fell last month as commercial building and civil engineering work continued to drag on the industry.

The Markit/CIPS UK Construction purchasing managers' index (PMI) showed a reading of 52.2 in December, down from 53.1 in November and below economists' forecasts of 53.1.

A reading above 50 indicates growth.

Despite the industry struggling to fire on all cylinders, housebuilding levels proved robust and new orders accelerated at the fastest pace since May.

However, these bright spots failed to inspire a cheerier outlook from firms, with the balance of companies expecting a boost to output levels in 2018 proving one of the weakest for four-and-a-half years.

The update comes as output in the UK manufacturing industry achieved "solid growth" last month, but eased back from a near four-and-a-half-year high when separate PMI data was released on Tuesday.

Tim Moore, IHS Markit's associate director, said: "The UK construction sector achieved a moderate expansion of business activity at the end of 2017, although the recovery remained uneven and slowed overall since November.

"Construction companies indicated that another strong contribution from housebuilding helped to offset subdued civil engineering activity and reduced volumes of commercial work.

"Total new orders picked up at the fastest pace for seven months in December, which provides a positive signal for construction workloads in the short-term.

"Resilient demand and forthcoming project starts also led to greater job creation and the strongest increase in input buying for two years."

Sterling was marginally higher versus the US dollar at 1.359 following the announcement, while the pound lifted 0.1% against the euro at 1.128.