Construction activity slows with house building hardest hit

Published:  06 July, 2011

UK: The construction industry is showing renewed signs of weakness, according to the latest survey of business sentiment in the building trade.

The Chartered Institute for Purchasing and Supply (CIPS) found that job cuts by building firms were at their highest level in five months and that overall confidence was at its lowest since the start of the year.

The survey found activity dipped from 54 to 53.6 (a reading above 50 indicates expansion) but remained in line with the long-run average.

The dip was primarily due to a slowdown in new business growth and continued weakness in house building. Sarah Bingham, Markit economist and author of the report, said: "The June data round off a further solid quarter of growth, albeit down on the first quarter."

"The worry is that the level of business confidence has fallen to a six-month low in the sector, which suggests that companies are expecting growth to weaken over the next 12 months. That is perhaps not altogether surprising given a marked easing in the rate of expansion of new business inflows in June."

After recruiting staff in May, firms returned to form and cut jobs in June at the fastest rate since January. Since the depths of the recession there have only been two months in which the sector has been a net employer, the PMI survey shows.

David Noble, CIPS chief executive, noted: "A solid reduction in employment indicated that firms are meticulously managing their costs, and prospects for any future expansions in output growth look moderate at best with confidence weakening."

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