The tracker: Feeling gloomy

01 / THE STATE OF PLAY

According to the construction activity indicator, conditions in the industry continued to deteriorate in October as the index remained below the 50 mark for the 20th consecutive month. However, it climbed by one point to 43, having fallen in the previous two months.

The residential and non-residential activity indices increased by two points each to reach 46 and 42 respectively, while the civil engineering index fell dramatically from 52 – a position of growth – in September to 41 in October.

The index for tender enquiries fell from the no-change mark (50) in September to 49 in October. Furthermore, although the orders index improved by one point to 41, this still indicated below-normal orders for the season.

At 19%, the proportion of survey respondents reporting no constraints on activity was the lowest for six months, while insufficient demand was a problem for 52% – the same level as in August.

Bad weather had become much more of an issue for firms, with 8% reporting it to be an activity constraint, while labour, material or equipment shortage had no impact on those surveyed.

Although finance continued to be a constraining issue for 15% of the respondents, there had been some easing since the previous two months. Six per cent reported that “other factors”, such as mortgage availability for potential customers, were holding firms back from undertaking possible work.

02 / LEADING CONSTRUCTION ACTIVITY INDICATOR

The leading construction activity indicator suggests that construction activity will continue to contract over the next two months, although at a slower pace. Gaining a point month-on-month to January 2010, the index should reach 46.

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

(See corresponding graphic below)

03 / LABOUR COSTS

In October, 52% of building firms reported a decrease in labour costs when compared with the corresponding month in 2008, while 36% experienced inflation of between 2.6% and 5%. However, only 4% indicated that labour costs had risen by more than 7.6%, a fall from three months ago when 16% suggested this was the case. Furthermore, although none of the building survey participants had seen an increase in labour costs of 0–2.5%, 8% experienced a rise of between 5.1% and 7.5%.

The picture remained unchanged from the previous three months for civil engineering firms; 60% of respondents indicated that labour costs had fallen compared with a year earlier, while 40% reported that costs had risen by between 2.6% and 5%.

(See corresponding graphic below)

04 / REGIONAL PERSPECTIVE

Experian Business Strategies’ regional composite indicators 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.

In October, the indices for the North and East Anglia hit the no-change mark (50), with the former gaining one point and the latter dropping three points. Meanwhile, Wales was the only region to remain above 50 as the index improved by one point to 54. The only other regions to see an increase in their indices were the South-west and Scotland, seeing an increase of four points (to 48) and one point (to 39) respectively. Meanwhile, the index for the West Midlands remained unchanged from September’s level of 44.

The North-west experienced the strongest fall in its indicator, dropping eight points to 29, its lowest reading since May. The East Midlands also experienced a marked drop, with its index falling by seven points to reach 41, the same level as that in May 2009. The indices for Yorkshire and Humberside and the South-east each decreased by six points to hit 33 and 45 respectively.

The UK indicator, which includes firms working in more than five regions, increased by one point to 48.

(See corresponding graphic below)