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UK construction: Activity growth at five-month high despite deteriorating housing sector

The seasonally adjusted Markit/CIPS Construction Purchasing Managers' Index registered a five-month high of 53.9 in October, up from 50.1 in September.

The study showed that despite business confidence being at its lowest for nearly three years, the growth of new business is supporting a faster rise in output . Input price inflation has also picked up sharply.

"UK construction output improved in October, as new orders recovered from September's modest decline," reports Sarah Bingham, Economist at Markit and author of the UK Construction PMI.

"Commercial-based construction output was the principal driver of overall growth, maintaining the relatively solid trend of recent months. In contrast, civil engineering activity was broadly stagnant, while the housing sector continued to suffer.

"The outlook for the sector remains uncertain, with October seeing a further weakening in sentiment regarding business expectations; confidence was at its lowest level since December 2008. Furthermore, the increase in employment recorded was fractional, despite the rise in new business and activity. This suggests that constructors remain tentative about the longevity of the sector's growth profile."

Commenting on the report, David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, says:

"'UK construction output experienced a rebound in October, and accelerated at some pace after a broad stagnation in September. It's still nothing to get excited about however. Due to current economic conditions, it may be some time yet before we start seeing the sustained growth the sector really needs.

On the plus side, reports of new contract wins from previously quoted projects and some advance orders for 2012 led to the steepest increase in new business since the Spring.

Across the sector as a whole, confidence about future business activity plunged to its lowest in almost three years, with optimism fading as constructors come to recognise that there are more challenges yet to come. The housing sector continued to deteriorate in October with a decline in activity recorded for a fifth successive month."

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4th November 2011

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