Construction still growing but confidence wavers

Grant Prior 12 years ago

Construction continued to grow in September but confidence among contractors is starting to droop as jobs were cut at the fastest pace for six months.

The latest Markit/CIPS Construction Purchasing Managers’ Index showed a stronger reading than August’s figures but contained warnings about future workloads.

The survey concurs with the Construction Products Association’s latest state of trade report, which saw a rise in sales of construction materials during the third quarter.

But again materials producers said they were deeply pessimistic about future prospects.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “While the construction sector is still growing, a sharp fall in confidence suggests work in the pipeline may not be so strong.

“Not since the onset of the recession have we seen optimism in such short supply.

“Commercial and civil engineering activity was on the up and contributed to overall growth.

“However, this may be only a temporary reprieve – once the last of the public sector budget has been exhausted it is likely that we will see a negative impact from the inevitable cuts.

“Meanwhile, firms continue to nervously reassess their resourcing requirements, suggesting that staffing costs will be squeezed for the foreseeable future.”

Sarah Ledger, Economist at Markit and author of the UK Construction PMI added: “New order growth slowed again, suggesting that, upon completion of existing contracts, activity may weaken.

“Residential construction is already falling, whilst strong commercial and civil engineering figures are likely to be benefitting, at least to a degree, from eleventh-hour budget spending.

“Given the impending public sector cuts, funds are unlikely to be replenished to the same extent.

“Confidence amongst construction companies suffered a sharp knock in September, with sentiment at its lowest level since March 2009. This was played out through a further marked cut in jobs.

“However, the overall economy is not forecast to return to the depths of the downturn recorded in 2008/2009, suggesting that constructors have had their fingers burnt by the severity of the recent recession and are perhaps overly cautious on their outlook for the sector.”

Meanwhile, Noble Francis, economics director for the Construction Products Association, said: “Sales of both heavy side products, typically used in the early stages of the construction process, and light side products, such as paints, heating and lighting products, were strong relative to 2009 Q3

“Expectations about the future, however, were more subdued, particularly on the heavy side.

“From a peak of 81 in 2010 Q2, the expected heavy side sales index fell to 50, suggesting that sales volumes are anticipated to plateau in Q4.”

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