The tracker: Coming in to land

01 / The state of play

Construction activity has been declining steadily since April’s brief return to growth, but the rate of contraction was less in July than June (46 compared with 44). The indices for residential, non-residential and civils were all below 50, although there was some improvement in the residential and civil engineering sectors, which rose by five points and three points respectively.

Orders remained below normal for the 25th consecutive month in July, although the new orders index edged up by two points to 45, its highest for six months.

In contrast, respondents continued to report that tender enquiries rose slightly during the month, highlighted by the tender enquiries index reaching 52, one point above June.

The usual lag between tenders, orders and output has been underlined by recent figures from the non-residential sector. Here, the tender enquiries index has been above the no-change mark of 50 for almost a year, whereas the new orders index has posted an “above normal” reading for only the past couple of months. This has yet to feed through to output in the sector, with the index remaining below 50.

Prospects for construction employment remain gloomy - the index was in negative territory for the 31st consecutive month in July. The index posted 36, an increase of one point on June’s reading.

Firms still anticipate reducing their prices over the coming months, with the tender prices index posting 43. The index has been below 50 in each month since June 2008.

02 / Leading construction activity indicator

CFR’s Leading Construction Activity Indicator indicates construction workloads will continue to fall over the next three months. However, the rate of decline is expected to ease in August and September, and remain unchanged in October.

The indicator uses a base level of 50: an index above that level indicates an increase in activity, below that level a decrease.

(see corresponding PDF)

03 / Labour costs

About one-third of civil engineering firms indicated that annual labour cost inflation was negative in July; 33% reported that labour costs rose between 0 and 2.5% over the same period.

The proportion of building firms reporting that labour costs had fallen over the year to July was higher at 45%. Annual labour cost inflation of between 0 and 2.5% was reported by about 14% of residential and non-residential construction firms, and a quarter indicated that labour costs had risen by between 2.6% and 5%.

Annual labour cost inflation of more than 7.6% was reported by 14% of building firms in July, but by no civil engineering firms.

(see corresponding PDF)

04 / Regional perspective

Three of the 11 indices for the regions and devolved nations increased in July. The strongest rise was in the east Midlands, which rose three points to 52. Indices in Scotland and the South-east both went up by one point to 46 and 49 respectively.

Yorkshire & Humberside experienced the most marked fall in its index, although it remained the most buoyant across all the regions and nations.

The index fell six points to 55. East Anglia’s index fell five points, but also remained in positive territory at 54. The South-west’s index declined by five points to 46, its lowest reading for 10 months. The index for the North remained above the no-change mark of 50 for a sixth consecutive month, but fell by two points.

Wales remained the most negative, with the index edging down one point to 34, a 19-month low. The North-west did not fare much better: it posted 35, a point lower than in June.

Northern Ireland’s index remained unchanged at 41 in July.

The UK index, which includes firms working in more than five regions, rose by two points to 57.

Experian’s regional composite indices incorporate current activity levels, the state of order books and the number of tender enquiries received by contractors to provide a measure of the relative strength of each regional industry.

(see corresponding PDF)