Britain’s housebuilding industry put a recovery on hold in June as construction firms delayed projects ahead of the general election that culminates Thursday.

S&P Global Market Intelligence said its UK purchasing manager index for construction slipped to 52.2 in June from 54.7 in May. It was much lower than the reading of 54 expected by economists surveyed by Bloomberg but still over the threshold of 50 indicating growth.

Construction firms blamed the weakest rise in new orders since February on uncertainty around the election. The ruling Conservative Party and Labour opposition promise to build more homes, but housebuilding was the weakest segment in the PMI survey.

The figures added to evidence that the economy’s bounce back from recession cooled in the second quarter with the composite PMI showing a wider slowdown in June.

The surveys suggest the new government will inherit a lackluster economy struggling to shake off the effects of a cost-of-living crisis and higher interest rates. Construction is one of the sectors worst affected by higher borrowing costs and a stagnation in the housing market.

“While there were signs of a slowdown in the latest survey period, most notably around housing activity, firms indicated that a slowdown in new order growth was in part related to election uncertainty,” said Andrew Harker, economics director at S&P Global Market Intelligence. “We may therefore see trends improve once the election period comes to an end.”

S&P said the construction sector was dragged down by a fall in activity for housebuilders, a setback after May delivered the first expansion in 1 1/2 years. Civil engineering and commercial developers saw another rise in activity, though at a softer pace.

Confidence in the year ahead “remained strong,” and hiring increased at the fastest pace since August 2023.

Separate figures from the Bank of England showed some easing of the lingering cost pressures that have kept policymakers from cutting interest rates from a 16-year high.

Firms questioned last month expected to raise their prices by 3.6% over the following 12 months, down from an expected 3.8% in May, the BOE’s Decision Maker Panel survey found. Anticipated wage growth slipped to 4% from 4.1%, while consumer prices were expected to rise by 2.8% - a 0.1 percentage-point decline.

However, expected wage growth remains above the 3% or so the BOE deems compatible with its 2% inflation target, while firms think inflation will still be above target in three years. Markets have scaled back rate-cut bets since the start of the year and are now only fully pricing in the first reduction in November.

  - Bloomberg