Construction growth slowest since recession

2 November 2010
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2 November 2010 | Lindsay Clark

The construction industry grew in the past month but at its lowest rate for eight months, according to the Markit/CIPS Construction Purchasing Managers’ Index.

Latest figures showed the sector was expanding at 51.6, down from the 53.8 performance in September. A score of 50 indicates no change.

Only the commercial sub-sector recorded a rise in activity, with housing and civil engineering scoring a fall. Government spending cuts continued to undermine confidence, the report found.

Sarah Ledger, economist at Markit and author of the UK Construction PMI, said: “While the UK construction sector managed to record growth in October, it seems more evident that the current expansion has peaked.

“The month-on-month rise in new business eased once again, with constructors attributing this partly to reluctant clients that are concerned over public spending cuts and the health of the general economy. Looking ahead therefore, it may be reasonable to assume that construction will have less of a positive impact on GDP compared with the third quarter.”

Purchasing activity also fell in October, the PMI report said. Builders said existing contracts were drawing to a close and new business growth is slowing. Delivery times increased as suppliers remained hesitant to hold inventories.

CIPS CEO David Noble, said: “Construction will have to look much harder for new contracts going forward, so it’s no surprise that many are cutting jobs and reducing purchasing activity to provide a safety net against further falls.

“This data is particularly nerve-racking given the boost the construction sector gave to the overall GDP growth last quarter. Commercial activity may have fared less badly than in the underperforming housing market, but overall expectations of future business remain historically low. The high hopes of earlier in the year seem to have given way to dire predictions on what the future may hold.”

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