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Construction expansion slows as housing growth weakens

Weaker housing growth has contributed to a slowdown in the expansion of construction output, although the sector continues to perform strongly as a whole.The Markit/Chartered Institute of Procurement and Supply Purchasing Managers' Index stood at 61.4 in October, down from 64.2 during September and the lowest reading for five months.Nevertheless, the figure remains well above the 50.0 no-change threshold and significantly higher than the long-run survey average of 54.5.All three main areas of construction experienced a slower rise in output, led by the weakest upturn in residential building for 12 months. According to some respondents, less favourable housing market conditions had resulted in increased caution among clients, along with the delaying of the launch of new development projects.Tim Moore, senior economist at Markit, commented: "October's survey provides the first indication that the chill winds blowing across the UK housing market have started to weigh on the booming residential building sector. "House building activity still increased at a strong pace overall, but the sharp growth slowdown since this summer reflects greater caution towards new development projects amid tighter mortgage lending conditions and renewed uncertainties about the demand outlook."The strongest-performing construction category was commercial, despite growing at its slowest pace for five months.Civil engineering was the weakest-performing sector, although there was only a slight easing of its pace of growth on September's figure, with expansion remaining well above the long-run average.October saw weaker new business gains for the sector, with the slowest increase in incoming work since May. Anecdotal evidence suggested that, although there was strong demand for new construction projects, signs of a slowdown in the UK economy were leading to delays to new contracts.Firms in the sector continued to boost headcounts during October as a result of strong pipelines of existing work and confidence in the business outlook.Levels of optimism remain high, with 55 per cent of those surveyed expecting an output rise over the next 12 months and just nine per cent forecasting a reduction. 

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