Construction growth slows as recovery peters out

Grant Prior 12 years ago
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Construction growth has slowed to its lowest rate for eight months with only the commercial market recording a rise in activity during October.

Latest data from the Markit/CIPS Construction Purchasing Managers’ Index confirms that the construction recovery peaked in the summer and both new orders and activity are slowing.

Contractors also implemented a further round of job cuts, with future expectations also remaining relatively weak.

The index fell to a seasonally adjusted 51.6 in October, after rising to 53.8 in September. Economists had expected the index to decline to 53.0 in October.

On the index, a level above 50.0 indicates industry expansion, below indicates contraction.

The figures are at odds with recent Government output data which highlighted construction as one of the main drivers of GDP growth.

Sarah Ledger, Economist at Markit and author of the report said: “Whilst 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.

“The slowdown in the sector was highlighted by another month of job cuts, while confidence remained at relatively low levels.

“Looking ahead therefore, it may be reasonable to assume that construction will have less of a positive impact on GDP compared to Q3.”

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said: “The recent growth in the construction sector seems to be petering out.

“Further declines look inevitable as nervy customers and a spendthrift public sector put firms in a precarious position.

“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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