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Housing lags behind fragile recovery

Housebuilding continues to lag behind the painfully slow UK construction recovery, shrinking for the third month in a row according to an influential report.

The UK Construction Purchasing Managers’ Index, carried out by the Chartered Institute of Purchasing & Supply in conjunction with Markit, found a minor expansion in the industry as a whole in November.

But while commercial and public sector non-housing construction picked up, housing fell for the third month in a row. This comes after six months of strong growth, but at least November’s slowdown was not as pronounced as it had been in September and October.

A seasonally adjusted figure of 47.2 was posted for last month, after readings of 45.4 in September and 46.2 in October. Anything below 50 represents a contraction.
CIPS chief executive David Noble said uncertainty in the housing market was exerting a downward pressure on the whole construction industry.

He said: “The housebuilding sector in particular continues to suffer as a weaker housing market makes builders nervous about committing to large new building
projects, and competition is rife.

“Purchasing managers say that growth in the current month was reliant on commercial and civil engineering - yet uncertainty remains about the impact of public
sector spending cuts.”

The commercial sector registered a reading of 54.4 in November, while the civil engineering sector - which includes all public sector work - posted 50.9.

Although the UK construction sector expanded overall in November, the total number of jobs in the industry shrunk, according to the index.

New contract wins were restricted, according to the data, as clients deferred work. But optimism over future business prospects also improved to their strongest in five months. The overall seasonally adjusted index posted 51.8 in November, up slightly from October’s 51.6.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said the data suggested the construction rebound was running out of steam.

He said: “After rising firmly earlier in the year, the new orders component is now only just in positive territory, suggesting that the strong rebound in construction
output signalled in the official data over the past two quarters is unlikely to be sustained.”

He said the report’s findings echoed those from a recent RICS Construction Survey. “Both the RICS and the CIPS surveys suggest that private commercial development is the most resilient sub-sector at the present time.

“However, this alone is unlikely to be sufficient to lift construction output materially higher in 2011.”

Subcontractor usage was down for the sixth month running, registering 46.5 in November. Availability of subcontractors hit an eight-month high at 57.1, but perceived quality of subcontractors fell for the fifth month running.

Volume of materials purchased dropped in November, as did suppliers’ delivery times.


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