Construction growth set to fall into 2012

Tim Wallace
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CONSTRUCTION in the UK hit a five-month high in October, figures released yesterday from Markit revealed, though output fell over the year and the industry fears worse is to come.

The purchasing managers index (PMI) for the sector rose sharply to 53.9, strongly up from the nine-month low of 50.1 recorded in September. Any figure over 50 indicates expansion.

However, estimates released by the Office for National Statistics (ONS) on Tuesday showed a 0.6 per cent decline in output over the third quarter of 2011, and a four per cent fall compared with the same period of 2010.

Markit’s index relating to future production fell to its lowest level since December 2008, leading analysts to warn that the growth may be shortlived.

“While the pick up in construction activity in October is to be welcomed, it does not hugely dilute fears that the economy could contract in the fourth quarter,” said Howard Archer from IHS Global Insight.

“The government’s public spending cuts are limiting overall expenditure on public buildings, schools, hospitals and infrastructure. On top of this, house building activity is likely to be constrained by persistently weak housing market activity, soft prices and a worrisome outlook.”

Meanwhile, figures from the department for communities and local government, also out yesterday, showed growth in housing supply falling.

A net of 121,200 additional homes were created in 2010-11, representing a six per cent decrease on the previous year’s growth.

London saw the largest fall in growth rate, down 27 per cent from 24,340 in 2009-10 to 17,830 in 2010-11. Almost 5,000 homes were demolished nationwide in the last year.