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Home Economic Fundamentals UK Economic Economic indicators: Construction industry still contracting
Economic indicators: Construction industry still contracting PDF Print E-mail
UK Economic
Written by Sam Coventry   
Tuesday, 03 November 2009 12:39
The Economy News: Twenty month long decline of the UK construction sector continues unabated.


The Economy News can this morning report that the pace of contraction of UK construction sector accelerated for second successive month.

The UK construction sector remained firmly in recession during October, with falling activity and employment again signalled.

The poor news for the UK construction industry contrasts sharply with the news that the manufacturing industry continues to recover with the seasonally adjusted Purchasing Managers’ Index (PMI) posting a reading of 53.7 in October.

Anything above 50 reflects growth on the PMI; and the latest reading is the highest level recorded since November 2007 and the third highest in history.

The fortunes of the construction industry comes as input costs rose further.

While domestic inflation remains low there are pressure on imports courtesy of a weaker sterling, and this could be a key cause of the rising input costs.

The seasonally adjusted CIPS/Markit Construction Purchasing Managers’ Index (PMI) posted a reading of 46.2 in October, signalling a further fall in UK construction sector activity, and at a faster pace than that seen in September.

A decline in activity has now been recorded in each of the past twenty months.

Sectoral data


Sub-sector data showed growth in residential construction for a second successive month. However, this trend was not mirrored within the commercial or civil engineering sub-sectors, where further contractions were recorded. The decline in civil engineering activity was the fastest recorded in seven months.

Latest data showed that new business levels remained unchanged since September, ending a nineteen-month period of decline. Whilst some panellists reported that tenders for business were proving successful, these were offset by other comments of financial constraints at clients.

However, with activity levels falling further, purchasing volumes decreased, with the pace of reduction accelerating since September to the fastest in four months.

Reflective of the sustained decline in demand for materials from construction companies, suppliers shortened lead times for an eighteenth month in succession, indicative of the extent to which excess capacity has expanded during the current recession.

Staffing levels at construction companies fell in October. The latest pace of job cuts was substantial and accelerated since September, as redundancy programmes continued to be implemented. Requirements for sub-contractors reduced markedly in October.

Input prices increased in October for the first time in a year, as higher fuel prices and unfavourable exchange rate movements resulted in rising costs.

Optimism over further business prospects remained high during the month. Panellists reported that they expected recovering economic conditions to boost demand and expenditure. Anticipated improvements in workflow resulting from marketing initiatives were also noted.
Last Updated ( Tuesday, 03 November 2009 12:42 )