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Construction decline easing, but industry still in recession

The industry may be nearing the bottom in terms of falling output, according to the latest Ernst and Young/Construction Products Association Activity Barometer.
The latest Barometer shows that while sale of construction products has continued to decline, the rate of decline is at a slower rate than previously, indicating a slight improvement from the last quarter, which had returned the lowest figure ever recorded in the Barometer.

A figure of 50 represents no change in sales compared to a year earlier with below 50 representing a fall in sales, therefore this quarter’s overall results of 12 still shows that most manufacturers continue to be affected by the falls in construction. Firms in the industrial and commercial sectors are currently experiencing sharp falls in construction and are continuing to suffer more than those in other sectors.

Quarter 3 shows that the recession is continuing for product manufacturers, with figures of 6 and 18 for heavy side and light side manufacturers respectively. This is despite a slowing, and in some cases ending, of the destocking that was prevalent in the first half of 2009 and the anticipation that economic activity will return to growth in the third quarter of 2009.

Noble Francis, Economics Director for the Construction Products Association said; “This latest figure of 12 is a considerable improvement when compared to the figure of zero that was reported in the second quarter of 2009 and reflects the recent improvement in the housing sector with house prices, mortgage approvals and housing starts all rising in recent months.

“However, looking forward, manufacturers are still pessimistic but not as pessimistic as they have been over the last three quarters. Figures of 15 and 29 for heavy side and light side manufacturers respectively continue to illustrate that product manufacturers still anticipate further falls in sales in the final quarter of 2009 compared to a year earlier. While economic activity appears to be returning to growth, this does not appear to be the case for construction or product manufacturing where output, order books and employment continue to fall.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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