Construction decline easing

CONSTRUCTION activity in the UK economy contracted for a 22nd consecutive month in December, though the pace of decline eased and firms were upbeat about the future, a survey showed yesterday.

The CIPS/Markit construction purchasing managers’ index (PMI) rose slightly to 47.1 in December from 47.0 the previous month, on a measure where any figure below 50 signals falling activity.

However, this is still a significant improvement on February’s index low of 28.6.

Construction accounts for around six per cent of the UK’s gross domestic product.

Economists noted that the construction series is currently painting a more gloomy picture than official data from the Office for National Statistics, which showed that the sector returned to growth in the second quarter of 2009 after a prolonged contraction in 2008 and the start of 2009. It improved again in the third quarter of last year, expanding by 1.9 per cent.

A breakdown by sub-sector showed both commercial and civil engineering construction activity continued to decline in December, but residential construction expanded for a fourth month running and at its fastest rate since August 2007.

Incoming new business declined after rising in November. But construction companies were optimistic business would pick up over the coming year.

“Though the sector ended the year on a bad note, there are some glimmers of hope,” said CIPS chief executive David Noble.

“Purchasing managers also remain confident that 2010 will be a much better year for the construction sector and that it will begin to grow again.”