The special index run by the Markit/Chartered Institute of Purchasing and Supply eased slightly to 58.4 in June from 58.5 in May, which was its highest since September 2007.

New order growth slowed moderately during the month, indicating some consolidation of the strong expansions recorded in the previous two months.

But the growth failed to create more jobs as concern over public spending cuts and VAT increases dampened confidence.

David Noble, chief executive officer of CIPS said: “Although the construction sector maintained steady growth in June, question marks loom over the sustainability of this recovery in the longer-term.

“Most tellingly, modest rises in order books did little to boost employment levels, and confidence over future activity dropped.

Meanwhile, curbing inflation continues to be a big issue because firms are nervous about passing higher costs onto to clients.

The sector is also bracing itself for another spell of troubled times following the public spending cuts and forthcoming VAT rises announced by the Government last month.

“A stark reminder of just how hard this sector has been hit is the handful of cranes currently dotting the skyline and the half-finished construction projects.

“Recovery in the second half of the year is likely to remain fragile and we are still a long way off seeing the industry operate the way it did pre-recession,” he warned.

Again housing was the strongest performing area, with a substantial expansion signaled during the month. Moreover, growth in housing activity was the sharpest since December 2003.

The increase in civil engineering activity also accelerated during June, and was the strongest in 27 months.
Civil engineering has been the weakest performing of the three sub-sectors in recent months, although expanded at a slightly faster rate than commercial-based construction in June.

The latest rise in commercial activity was solid, although slowed for a second successive month and was lower than the long-term average for the series.