Sunny outlook

In May, the trend for increases in the activity index continued, with a rise of another point to 59. Barring January’s index of 63, which appears to be something of an anomaly, this matches the highest point that the index has reached in almost 10 years.

The orders index remained unchanged from April at 72, while the tender enquiries index could not maintain April’s momentum, falling two points to 60.

Optimism surrounding the short-term employment prospects in the industry continues to grow, as it does for tender prices.

CFR’s Leading Construction Activity Indicator, which provides a short-term forecast of activity levels in the industry, indicates continuing growth at a steady rate in construction activity over the next three months.

According to the latest update from Experian’s construction forecasting and research team, the volume of construction output increased by 4.4% in 2003, twice the 2.2% increase in GDP. The outlook for this year is still positive though the growth rate will moderate to 3.4%. It is forecast to slow further to 2.7% in 2005 before picking up again to 3% in 2006. The public sectors are expected to be the main drivers of growth over the forecast period, with both the housing and non-residential sectors likely to see double digit rises in output.

On the regional front, the strongest growth in activity levels was in the West Midlands. Order books were strongest in northern England.

Activity-levels
The non-residential sector retains its positions as the strongest sector ahtough, with only a one-point increase to 62, it showed the smallest increase of the sectors in May. The residential index increased by three points to 58, while that for civil engineering leaped 4 points to 55.

The number of firms reporting no constraints fell marginally by one point in May to 46%. As can be expected as the season changed, bad weather was only cited by 1% of contractors as a constraint on activity. Adding force to the general concern for the labour situation in the industry, the percentage of firms highlighting labour shortages as a constraint on activity increased by four points to 17%. The number of firms citing other constraints also rose by four points to 10%.

Order-books
The order book index remained relatively steady in the residential and non-residential sectors with no change and a one-point fall respectively leaving them at 71 and 80. The civil engineering order book index shot up five points to 68, reflecting highly optimistic outlooks for all of the sectors.

Tender-enquiries
The civil engineering tender enquiry index leaped by 10 points to 73 in May, making it the strongest sector. However the residential and non-residential sectors both saw their tender enquiry index fall by two points, down to 59 and 64 respectively.

Tender-prices
The residential and civil engineering sectors both experienced an increase of one point in their tender prices index, to 70 and 66 respectively. The non-residential index fell one point but remained at the highest level, 71.

Employment
Employment prospects in the civil engineering sector suffered another setback as the sector's index dropped three points to 45. The residential sector, however, recorded an increase of four points in its employment index from 53 to 57, while the non-residential index remained unchanged at 58 for the third consecutive month.