Construction sector expansion begins to slow

2 September 2011

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2 September 2011 | Adam Leach

Output in the UK construction slowed in August and new business increased at the “mildest” rate for seven months, according to buyers.

The Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) for August recorded a figure of 52.6. Although a figure above 50 indicates growth, it is lower than the 53.5 seen in July.

More activity in the commercial sector was balanced out by weaker growth in the area of civil engineering, contributing to an overall slowdown. New business wins increased for the eighteenth month in a row, but the rate of increase was the least significant since January.

To compound this, confidence levels dropped to the lowest level for eight months as respondents cited rising commodity prices and increasing competition souring the outlook for the industry.

David Noble, CEO at CIPS said: “Reality is continuing to bite in the UK construction sector, as worries over wider economic conditions contribute to a slower rate of output growth.

“Although over a third of panellists anticipate growth of activity in the coming year, the overall level of positive sentiment remains far below that seen at the start of the recovery. Lukewarm order books have contributed to sharper declines in staffing levels. However, the proof of the pudding will be whether the reported increase in competition for new orders, plus increases in fuel and commodity prices will subdue confidence going forward.”

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