Builders’ gloom adds to fears of a double-dip recession

Fears the global economy is heading for a double-dip recession mounted today as British builders warned the recovery is running out of steam.

The UK construction sector expanded for a fourth month in a row in June, but confidence in future growth crumbled in the wake of tax rises and spending cuts outlined by Chancellor George Osborne in the emergency Budget.

It was just the latest piece of disappointing economic news from around the world and came ahead of key jobs figures in the US.

Stock markets have tanked in recent days amid concerns about growth in the US and China, the impact of austerity measures around the world, the health of the banking sector and the debt crisis in Europe.

"Markets are fretting over the fate of the global recovery," said Rob Carnell, chief international economist at ING in London.

The FTSE 100 index steadied today — up 18.96 at 4824.71 — ahead of the US unemployment figures, but analysts warned it could be short-lived.

Anthony Grech, head of research at IG Index, said: "The market still looks decidedly unhealthy after the slides seen in the last couple of weeks.

"The risk remains that brief rallies will end up being just that and will be viewed as an opportunity to sell into strength rather than a sign of confidence returning."

Royal Bank of Scotland said the debt crisis in Greece and Spain was now infecting the rest of Europe — including the UK.

"The risk of a double dip for the European economy is rising fast," said RBS economist Ross Walker.

"Absent an effective policy intervention to tackle the debt crisis in the periphery over the coming months, the European economy will double dip in 2011.

"The UK, France, Italy and Spain are now amongst the large European countries in the slowdown phase. This suggests that the problems in the periphery might have started infecting the core."

A survey of UK builders by Markit and the Chartered Institute of Purchasing and Supply found the construction sector grew again last month.

The index of activity, where 50 marks the cut off between expansion and contraction, edged slightly down from 58.5 in May to a still impressive 58.4.

However, builders were far less optimistic about the future following the Budget last week.

CIPS chief executive David Noble said: "Question marks loom over the recovery's longer-term sustainability."