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CIPS spots pick-up in activity

The final quarter of 2011 started more positively for the UK construction industry according to the latest Markit/CIPS Construction Purchasing Managers’ Index® (PMI®).
The index rose to a high of 53.9 in October, up from 50.1 in September. There were improvements from both the commercial and civil engineering industries. Housing, however, posted another contraction in activity, although the rate of decline slowed to a marginal pace.

New orders picked up in October, after a slight fall in September. Buying activity increased at a solid and accelerated pace, although job creation eased slightly to a fractional rate.

Supplier performance has worsened, on average, in each of the past 14 months. One-tenth of the survey panel reported delivery delays during the latest survey period, against less than 4% that saw an improvement.

Picking up from September’s ten-month low, input price inflation was marked in October. Respondents cited higher fuel and raw material costs as the main sources of upward pressure. Even so, the rate of increase remained slightly below the year-to-date average for the series.

Although UK constructors remained optimistic, overall, regarding activity levels in the coming year, positive sentiment was the weakest for nearly three years. Reports indicated that uncertainties surrounding the continued strength of private sector demand, and about the effects of public spending cuts, had dampened confidence.

Sarah Bingham, Economist at Markit and author of the UK Construction PMI® said:

“UK construction output improved in October, as new orders recovered from September’s modest decline.

“Commercial-based construction output was the principal driver of overall growth, maintaining the relatively solid trend of recent months. In contrast, civil engineering activity was broadly stagnant, while the housing sector continued to suffer.

“The outlook for the sector remains uncertain, with October seeing a further weakening in sentiment regarding business expectations; confidence was at its lowest level since December 2008. Furthermore, the increase in employment recorded was fractional, despite the rise in new business and activity. This suggests that constructors remain tentative about the longevity of the sector’s growth profile.”

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “UK construction output experienced a rebound in October, and accelerated at some pace after a broad stagnation in September.

“It’s still nothing to get excited about however. Due to current economic conditions, it may be some time yet before we start seeing the sustained growth the sector really needs.

“Across the sector as a whole, confidence about future business activity plunged to its lowest in almost three years, with optimism fading as constructors come to recognise that there are more challenges yet to come. The housing sector continued to deteriorate in October with a decline in activity recorded for a fifth successive month.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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