Weather dampens UK construction growth in Feb-Markit/CIPS

LONDON, March 4 Tue Mar 4, 2014 4:30am EST

LONDON, March 4 (Reuters) - The strong pace of growth in Britain's construction sector eased off last month, hurt by heavy rain and floods which affected house-building, a survey showed on Tuesday.

The Markit/CIPS construction PMI slipped to 62.6 in February from 64.6 in January - which was its highest level since August 2007. A Reuters poll of economists had forecast the index would fall to 63 in February.

Purchasing managers who took part in the survey said the adverse weather hit house-building in particular which remained strong but grew at its slowest pace in four months.

By contrast, civil engineering activity saw its strongest month since April 1997, helped by higher spending by local authorities which in some cases was in response to the rain.

Job creation was at its highest in three months as 59 percent of construction companies expected a rise in output over the year, compared with only 10 percent predicting a fall.

Britain's construction industry was hit hard by the financial crisis of 2007-09. But it has been recovering since last year thanks to a combination of record low interest rates, government programmes to encourage people to buy new homes and falling unemployment.

There were signs of price pressures in the industry's supply chains which have barely had a chance to expand after the slump. The overall rate of input price inflation picked up from a five-month low in January and sub-contractor rates grew at their fastest pace on record.

"Strong demand is continuing to put pressure at a supplier level, with vendors battling with low stocks and prices increasing as a result," said David Noble, chief executive at the Chartered Institute of Purchasing & Supply.

He said delivery times were still getting longer but at the slowest rate since August, "suggesting that the very worst of the squeeze has passed."

The construction sector accounts for about 7 percent of Britain's gross domestic product.

Bank of England Governor Mark Carney has said the economy might suffer a temporary hit caused by the rain and floods.

The pace of growth in Britain's manufacturing sector picked up a touch in February, a similar survey showed on Monday. (Reporting by David Milliken; Editing by Toby Chopra)