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Construction activity shows 'marginal' growth

Construction industry activity grew marginally last month, according to the latest Purchasing Managers Index from Markit/Chartered Institute of Purchasing and Supply.

The construction PMI stood at 50.9 last month, a marginal growth in activity, according to Markit/CIPS, after the first contraction since February 2010 was recorded in June. Under the index, a reading of 50.0 or more indicates industry activity growth.

But the figures show the second fastest drop in new work for two-and-a-half years last month.

Commercial activity was the only one of the three sub-sectors analysed by Markit/CIPS to show a growth in July, while housing and civil engineering activity declined for the second consecutive month.

The figures follow the downgraded forecasts released by the Construction Products Association towards the end of last month. Those forecasts were for a 4.5 per cent decline in construction output this year, revised downwards from the association’s spring update.

Input costs for contractors continued to rise, meaning the period of cost inflation extends to two-and-a-half years. The level of increase in July 2012 wasrepotred to be more subdued than previous months, and was attributed to higher energy and fuel costs. Sub-contractor rates fell for the fourth consecutive month.

Markit senior economist Tim Moore said: “July’s survey offered little sign of an imminent rebound in the UK construction sector, with total activity rising only marginally after well documented temporary factors had weighed on output last month. Another drop in new orders, alongside wet weather conditions, meant a soft platform from which construction output could bounce in July. The pace of new order decline was one of the fastest seen in the past three years, and consequently there was just a meagre post-Jubilee expansion of activity levels.

“However, the survey shows that some construction firms are expecting, or at least hoping, that the sector will receive a shot in the arm during the next 12 months. A slow and gradual recovery remains most firms’ base scenario, with some anticipating a boost from deferred projects going ahead later in the year. This in turn pushed business sentiment up from June’s recent low and supported employment trends across the industry in July.”

PwC’s head of engineering and construction Jonathan Hook said: “Whilst this month’s PMI has showed a slight reprieve for the construction sector, it should be viewed against the longer term economic difficulties we are facing. Any slight fluctuation in activity should be benchmarked against the reality on the ground right now, that the construction sector in the UK has been having a tough 2012.

“Any degree of optimism for the next year or two for the industry will be centred around a government stimulus package to get stalled projects moving using guarantees and other measures, as there is little sign of a return of private sector confidence.”





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