Purchasing index for January shows indicators at third-worst level in 17 years, but a slight improvement on previous two months

The latest report from the Chartered Institute of Purchase & Supply has produced more bad news for the industry, with the group singling out construction as one of the two UK sectors most at risk in the recession.

The latest index, which is based on replies to questionnaires sent to purchasing executives at 600 companies, recorded a figure of 35.8 for January, the third weakest in the report's 17-year history. The only two worse months were November and December last year, with 34.9 recorded in December.

Five indicators are measured – such as new orders and output – and an index reading above 50 indicates an overall increase in that measurement, while below 50 denotes an overall decrease.

Commenting on the latest figures, the CIPS said: “Most noticeably, the performance of intermediate goods producers deteriorated, reflecting the greater exposure of this industry to the downturns in the beleaguered automotive and construction sectors.”

It said the main reasons behind the collapse were a drop-off in global aggregate demand and frozen credit markets. It added: “Domestic conditions were especially weak – largely as a result of the crises in the autos, construction, housing and retail sectors. Meanwhile, the economic difficulties being experienced by most f the UK's major trading partners meant exporters were unable to benefit from a lower sterling exchange rate.”

CIPS director Roy Ayliffe said the situation was “anaemic” and added: “There are record falls in employment as factory jobs were cut at an astonishing rate of 30,000 per month.”

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