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Construction bounces back

09 Feb 2011

Optimism amongst UK construction companies is reportedly at its strongest in eight months  

Optimism amongst UK construction companies is reportedly at its strongest in eight months in spite of continuing job cuts, as improved weather conditions and a rise in new orders led to growth in the sector last month (January).

The latest snapshot from the Markit/CIPS purchasing manager's index shows construction activity increased last month following the setbacks caused by December's heavy snowfall. The figures will calm fears triggered by the unexpected 0.5% contraction in the wider economy between October and December, although employment across the construction sector kept declining.

Markit/CIPS shows the construction index jumped to 53.7 in January from December's reading of 49.1, which had been the first contraction in the sector in 10 months. Any reading above 50 indicates growth while below 50 signals contraction.

Chris Williamson, chief economist at Markit commented: "The UK construction sector showed a welcome bounce-back from the snow-related drop in activity late last year. However, after estimating for the boost to activity in January resulting from the disruption to workflows in December, the underlying growth trend remains only very modest and well below the surging pace seen in the second quarter of last year.

"Looking at the trend in recent months, the housing market seems to be a particular area of weakness, with house building stagnating at best. Civil engineering has seen only very modest growth, leaving commercial activity as the only sector recording any noteworthy expansion, albeit well below that seen last spring.

"The outlook appears to be one of nervous optimism. Confidence over future business prospects was at its strongest in eight months, but this still remained relatively subdued compared to the long-run average. This nervousness about future prospects was highlighted by a disappointing further reduction in employment."

Commenting on the report, David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: "At the moment it is hard to tell what 2011 holds for the sector, even though confidence about future activity has risen, it is still weak and many are pinning their hopes on general economic improvements to make that confidence a reality. Furthermore, the rise in raw material prices as well as the latest VAT hike will add to the worries for the sector. Bearing this in mind we may be looking at another disappointing year with continued uncertainty where hopes are dashed."

News source: Courtesy of Glass & Glazing Magazine