Construction contraction will have little effect


The slowdown in construction activity will have little effect on the overall economy, said one leading economist.

The chief UK and European economist of Global Insight, Howard Archer, reacting to last week’s purchasing managers’ report, said the effects of the slowdown will be "relatively limited given that the construction sector only accounts for some six per cent of GDP".

He explained that January’s 16-month low in construction is further evidence that the economy is "faltering significantly".

The report found the construction activity index had fallen to 53.9 from 56.0 in December – it had peaked in August and reached its highest point since February 1998.

"This indicates that house builders are very wary about the outlook for the housing market," he said. "Evidence consistently points to it slowing markedly in the face of increased affordability pressures and tightening lending practices."

Mr Archer has predicted a base rate cut of a quarter of a per cent later this week, consistent with several leading financiers.

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