Construction records highest growth for eight months

Grant Prior 13 years ago
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Construction continued its recovery in February with latest figures from purchasing professionals showing output rising at the fastest rate for eight months.

The numbers surprised City analysts who were expecting a dip following January’s strong bounce back from December’s disastrous figures.

Compilers of the Markit/CIPS UK Construction PMI index believe that official Government figures for construction output will return to growth during the first quarter after contracting 2.5% in the final three months of 2010.

The latest report shows an index of 56.5 for February up from 53.7 in January where anything above 50 represents growth.

Sarah Ledger, Economist at Markit and author of the UK Construction PMI said: “February’s survey showed continued recovery in the UK construction sector following December’s weather-related decline in activity, with output rising at the fastest rate in eight months on the back of
strengthening growth of new business.

“The latest figures therefore suggest that, having contracted by -2.5% in the final quarter of last year, the ONS measure of construction output should bounce-back into positive territory in Q1.

“Demand and supply side pressures continue to push up purchase prices, with construction costs rising at the fastest rate since August 2008 and delivery delays the worst for over three years. Concerns about rising costs and fears over cuts in public spending meant future business optimism remained subdued and well below the long-run average.”

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said: “A weather-beaten UK Construction sector is showing signs of repair, with stronger rates of activity and a rise in new business continuing the reversal of fortune since the end of 2010.

“However, this new phase of recovery is at least in part built on shifting sands.

“Overall, reports about new tenders becoming available and projects being confirmed will be a relief to firms which have suffered the consequences of a subdued market.

The residential sector in particular appeared revitalised compared to recent months, with house building registering the fastest increase in activity since June 2010.

“As for manufacturing, the construction sector is suffering from higher input prices which increased considerably during February.

“53% of panellists indicated a rise in costs since January. Companies who have carefully managed costs may be in a better position to deal with this and the likely further aggravations caused by the unrest in the Middle East.

“The situation is still fragile, however, considering the likely impact of government cuts. Concern about the level of bank lending is also having a negative impact on confidence. This is echoed by a further reduction in employment.”

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