Construction growth peaks

The eight month rise in construction sector new orders and activity could be coming to a halt, according to the latest figures from the Chartered Institute of Purchasing & Supply (CIPS).

The Purchasing Managers’ Index (PMI) for October fell to 51.6, the lowest figure in eight months, but remained above 50, meaning that the sector was still expanding.

The decline was due to nervousness about public sector cuts and the weakness of the recovery, the CIPS said.

The strongest construction sub-sector was commercial building, while housing and civil engineering both posted results below 50.

There was also a “solid” reduction in employment by construction firms during the month.

David Noble, chief executive at the CIPS, said: “The recent growth in the construction sector seems to be petering out. Further declines look inevitable as nervy customers and a spendthrift public sector put firms in a precarious position.

“Construction will have to look much harder for new contracts going forward, so it’s no surprise that many are cutting jobs and reducing purchasing activity to provide a safety net against further falls,” he said.

Sarah Ledger, an economist at Markit and author of the PMI, said that the latest figures showed that high levels of construction growth in the past two quarters was likely to come to an end.

“Whilst the UK construction sector managed to record growth in October, it seems more evident that the current expansion has peaked.

“The month-on-month rise in new business eased once again, with constructors attributing this partly to reluctant clients that are concerned over public spending cuts and the health of the general economy. The slowdown in the sector was highlighted by another month of job cuts, while confidence remained at relatively low levels,” she said.

“Looking ahead therefore, it may be reasonable to assume that construction will have less of a positive impact on GDP compared to Q3.”