Optimism hits five-month high

The construction industry is highly confident about its future prospects, according to the latest report from the Chartered Institute of Purchasing and Supply. Optimism has reached a five-month high, the CIPS monthly survey has found.

Almost 58% of respondents said they expected construction activity to have risen by September 2007. The CIPS Future Business Activity Index read 75.7 for September, reflecting increased confidence.

This optimism was also evident in trends in purchasing and employment last month. Input buying rose at its fastest pace since March, while the growth of the construction workforce hit a six-month high.

CIPS recorded solid growth in construction activity in September. However, its Purchasing Managers’ Index showed that growth last month was slightly weaker. The index, which measures the construction economy, fell from 54.5 to 53.6 in September.

Roy Ayliffe, director of professional practice, CIPS, said: “In September, purchasing managers saw continuing growth in UK construction activity, with increased work on commercial projects being a key driver.

However, despite a weakening on August's performance, purchasing managers remain optimistic for the future. Many expect construction activity to rise in the next year.”

He added that the rate of input price inflation facing construction companies remained strong, despite easing to a four-month low. As a result lead-times were getting longer. “Anecdotal evidence suggested that costs were driven higher by increased metal prices, in particular copper and steel... Higher levels of purchasing combined with insufficient stock holdings once again led to average lead-times lengthening."

The survey found that growth in the market was mainly due to increased work on commercial projects. Housebuilding changed little during the month, while the Civil Engineering Activity Index fell for the first time since June.

The availability of subcontractors fell for the first time in over a year due to intense demand, the CIPS said. As a result the cost of subcontracted work rose at its sharpest pace since May 2005. The Sub-contractor Usage Index rose above the 50.0 no-change mark for the first time in six months in September to 50.4.