Post-Brexit malaise in the U.K. real estate and construction sectors increased on Monday after a closely watched gauge of sentiment dramatically worsened
Markit‘s construction sector PMI fell to 46 in June from 51.2. The June reading marked a seven-year low and was much worse than the expected outcome of about 50.5. Readings under 50 signal economic contraction and the June data marked the first time the index had fallen below that mark since April 2013. Most of the responses to the Markit survey were culled before the U.K.’s June 23 referendum on European Union membership, which resulted in a “leave” victory.
“Construction firms are at the sharp end of domestic economic uncertainty and jolts to investor sentiment, so trading conditions were always going to be challenging in the run-up to the EU referendum,” noted Markit senior economist Tim Moore. “However, the extent and speed of the downturn in the face of political and economic uncertainty is a clear warning flag for the wider post-Brexit economic outlook.”
Real estate companies and home builders led the decliners on the FTSE 100 after the survey, with developers British Land (BTLCY) Land Securities (LSGOF) and Hammerson (HMSNF) and home builders Berkeley Group Holdings, Barratt Developments (BTDPY) , Taylor Wimpey (TWODF) and Persimmon (PSMMY) each down well over 2%. The pound recently slipped 0.08% against the dollar to $1.3256.
The PMI data highlighted a steep drop in residential building and a smaller decline for the commercial property sector.