The tracker recovery on hold

01 / THE STATE OF PLAY

The construction activity index declined by one point in September. The index has now been below 50 for 18 consecutive months, and the upward trend that had been recorded since May now appears to have reversed.

However, the road to recovery is never smooth, and this is likely to be just a blip rather than a full-blown double-dip recession.

The civil engineering activity index rose 17 points, taking it above 50 for the first time since December 2007. The index for the residential sector dropped back by five points to 43, while the non-residential sector’s activity index fell two points to 40.

Order books were below normal for a 14th consecutive month in September, with the index edging down one point to 43. On a more positive note, the tender enquiries index was above 50 again, following a drop into negative territory in August. The index rose nine points to 51, as firms in all three sectors reported higher levels of enquiries compared with the previous month.

Having said that, there are still strong expectations among construction companies that they will lower prices over the coming three months.

The outlook for employment is still pessimistic, and the employment prospects index remained below 50. However, it did rise two points to 39, its highest reading for 16 months, suggesting that staffing levels are likely to fall at a slightly weaker rate to the end of the year.

Financial constraints continued to affect construction activity in September and firms also indicated that weak demand was an issue.

02 / LEADING CONSTRUCTION ACTIVITY INDICATOR

See attached graphic below.

03 / WORK-IN-HAND

In September, residential firms reported less work already accounted for than firms in either the non-residential or the civil engineering sectors. Most (67%) reported that they had up to three months work-in-hand, a slightly higher proportion than three months ago, and a quarter indicated that they had between three and six months work accounted for.

By contrast, civil engineering firms generally said they had higher levels of work-in-hand than three months ago, with about 18% reporting more than six months accounted for, compared with 15% three months ago.

Levels of work already accounted for at non-residential firms increased slightly compared with three months ago – 36% of respondents indicated that they had between three and six months work in hand, compared with 33% three months ago.

See attached graphics 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 September, only four regions experienced an increase in their indicators. The South-west and Wales rose by two points to 44 and 53 respectively. The South-east indicator was in positive territory at 51 for the first time in 15 months, following two consecutive months at the 50 mark. The indicator for the North rose by one point to 49.

The strongest fall in the indicator was in Scotland, where it dropped seven points to 38, its lowest reading since the series began in August 2000. The West Midlands also experienced a marked drop, with its indicator falling by four points to a four-month low of 44 in September.

Having moved above 50 for the first time in more than a year in August, the East Midlands’ indicator dropped three points to 48 in September. There was also a three-point decline, to 37, in the North-west, making it the worst-performing region.

The UK indicator, which includes firms working in more than five regions, decreased by one point to 47.

See attached graphics below.

This an extract from the monthly Focus survey of construction activity undertaken by Experian’s Business Strategies division on behalf of the European commission as part of its suite of harmonised EU business surveys. The full survey results and further information on Experian Business Strategies’ forecasts and services can be obtained by calling 0870-1968 263 or logging on to www.business-strategies.co.uk.

The survey is conducted monthly among 800 firms throughout the UK and the analysis is broken down by size of firm, sector of the industry and region. The results are weighted to reflect the size of respondents. As well as the results published in this extract, all of the monthly topics are available by sector, region and size of firm. In addition, quarterly questions seek information on materials costs, labour costs and work in hand.