Construction contracts again
Published:  04 March, 2010

LONDON: UK construction activity contracted in February although at the lowest rate so far in two-year contraction.

January's poor weather is the main cause with most companies expecting activity to rise this year.

The seasonally adjusted CIPS/Markit Construction Purchasing Managers' Index posted 48.5 during February, fractionally lower than the previous month's 48.6, signaling contraction broadly unchanged since January.

Sarah Ledger, economist at Markit said: "The recovery of the wider UK economy is yet to filter through to the construction sector, with February PMI data showing a sustained decline in activity levels over a two-year period. New opportunities to tender remained limited, compounded by funding constraints for new projects. Poor weather conditions also had a detrimental effect on the sector during the month. However, growth in residential construction was recorded for a sixth successive period.

"Construction companies remained optimistic over future activity for the next twelve months. Nonetheless, potential cuts in public spending could negatively impact sector performance, suggesting that fragility will be a key theme over the coming months."

House building was the only sector to show a rise in activity. Residential construction has improved in each of the past six months. In contrast, civil engineering work contracted at the fastest pace in February. The reduction in commercial construction activity was modest, and the weakest in six months.

New orders received by construction companies fell for a third successive month in February, although at only a marginal pace. Suppliers' delivery times improved for a twenty-second successive month, led by the further reduction in purchasing activity.

Input costs rose, the latest increase was the fourth during the past five months. However, the rate at which costs rose was modest, and substantially below the long-run series average.

Expectations for activity in the next twelve months continued to rise. Many panellists believed that the ongoing recovery in general economic conditions would boost the amount of opportunities to tender.

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