Construction grows but new orders down

Published:  05 March, 2012

LONDON: The construction industry grew at the fastest pace in nearly a year in February. The Markit/CIPS purchasing managers' index for construction jumped to 54.3, the highest since last March and compared with 51.4 in January. It was better than the 51.2 reading expected in the City.

"The slowdown in UK construction sector output growth recorded in January was reversed in February, with a solid increase in activity indicated," said Sarah Bingham, economist at Markit and author of the construction survey. "This was despite potential headwinds caused by poor weather conditions. The rise in output was supported by a stronger commercial expansion. Perhaps more encouraging was the sharp increase in new business received, which should keep firms busy in the coming months."

All three sub-sectors - housing, commercial and civil engineering - showed growth. Commercial construction was the strongest, expanding at the fastest pace since September 2010, while residential and civil engineering bounced back from contractions last month.

The data comes as the latest new orders figures from the Office of National Statistics for the final quarter of 2011 showed a fall of more than 15% compared with the same quarter one year earlier.

Construction Products Association economics director, Noble Francis said: "It is extremely concerning to see the ONS figures for construction new orders, which give the clearest picture of how the industry will pan out in 2012 and 2013, decline so sharply.

"The fall in orders of 14% in 2011 is only going to lead to decreasing construction output during the next 18 months."

"It is clear that the government's cuts are having an adverse impact on the industry with new orders for public falling by one third in 2011. On the positive side, it was good to see a rise in orders for private housing, industrial and infrastructure."

"Our latest forecasts for construction anticipate a 5.2% fall in the industry overall in 2012, with public sector construction falling 14%. It is clear that if the Chancellor wants construction to be at the heart of the economic recovery then the Budget will need additional measures to help the sector and economy," he said.

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