Expansion rate in UK construction industry slows

4 November 2005
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04 November 2005 | Helen Gilbert

The construction industry's rate of expansion slowed down in October to its slowest pace in five months, according to the latest CIPS Purchasing Managers' Index report.

The index, designed to measure the overall health of the construction economy, revealed a fall in total construction activity to 53.9 in October, compared to 57.2 in September and 57.4 in August.

Although growth was solid - an index above 50 indicates progression - the slowdown in activity was caused by a weakening in the rate of increase of new orders, combined with delays in starting new projects.

The housing and civil engineering sectors fared the worst, with housing activity falling for the first time in five months to 48.9 and the civil engineering index declining from 50.6 in September to 47.5.

Commercial was the only sub-sector to record growth, although the rate of increase cooled to a three-month low.

According to the findings, a robust rise in new orders was recorded in October, extending the current period of expansion to seven years. But the rate of growth eased to a five-month low, which panellists linked to delays in the confirmation of projects from clients.

The report said: "Growth of construction sector employment was sustained in the latest survey period, as firms geared up to take higher workloads. Nevertheless, the pace of hiring eased to the weakest in three months, as signalled by a fall in the seasonally adjusted employment index to 52.8.

"Panellists attributed the slowdown in employment growth to a similar cooling in the rate of increase of new orders."

The report also found that raw materials were becoming more expensive. Increasing oil costs drove input price inflation to an eight-month high and steel prices also rose.

Roy Ayliffe, director of professional practice at CIPS, said: "Nevertheless, construction firms remained bright about the future, as many cited investment in capacity expansion programmes, demand for construction projects and improved marketing as causes for optimism."

Coverage of previous months' UK construction PMI reports is available at www.supplymanagement.com/pmi


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