The UK development PMI falls to a five-month low regardless of robust housing development

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By David Milliken

LONDON (Reuters) – The UK construction sector lost momentum in October but suffered less than most of the coronavirus-hit economy thanks to a buoyant real estate market, a company poll on Thursday revealed.

The IHS Markit / CIPS purchasing managers’ index for the construction sector fell from 56.8 in September to 53.1 in October, a decline larger than the decline predicted by economists in a Reuters poll to 55.0 and the lowest since May.

However, contrary to the numbers released on Wednesday for the much larger service sector, the meter stayed well above the 50 level that separates growth from contraction.

“The construction sector was a bright spot in an otherwise dismal month for the UK economy in October,” said IHS Markit economist Tim Moore.

Housing construction was the main contributor to growth. This reflected a boom in demand since the lockdown ended, helped by a temporary drop in property taxes, which saw lenders approve the highest number of mortgages since 2007.

New orders in the sector, which accounts for around 6% of the UK economy, grew the most in five years.

The construction industry is also exempt from the four-week lockdown, which began Thursday in England – although companies were concerned last month about the potential impact of rising COVID-19 cases on demand.

“Respondents largely expressed renewed economic uncertainty and concerns about the sustainability of the recovery as pent-up demand gradually eased,” said Moore.

The civil engineering sector continued to see a sharp decline in activity, while business growth was rather subdued.

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