Contraction slowing in building sector

Jun 2 2009 By nebusiness

ECONOMIC recovery hopes were fuelled further today after survey figures revealed the slowest pace of decline in construction activity for more than a year.

The embattled construction sector saw a marked easing in the rate of contraction in the housing market last month, according to the Chartered Institute of Purchasing and Supply’s (CIPS) purchasing managers’ index.

And it revealed confidence among construction firms also rose to its highest level since August 2007, while new contracts fell only modestly since April.

The CIPS/Markit study showed a reading of 45.9 in May, up from 38.1 in April and a record low of 27.8 in February - marking its highest level since April 2008.

The sector is still in recession - as a score under 50 signals contraction - but the reading suggests the construction industry may be ``out of intensive care", said CIPS director Roy Ayliffe.

``After appearing to be in freefall in February, we are starting to see the construction economy show some signs of life and steer itself back onto the road of recovery," he said.

However, the survey confirmed continuing tough conditions, with competitive pressures remaining high and more jobs lost in the month.

They were given a helping hand with more falls in supplier charges, with the average price paid by UK constructors down for the seventh month in a row, the survey said.

The CIPS construction figures follow on from a spate of recent encouraging economic indicators, with manufacturing survey results yesterday showing activity at its highest level for a year in May.

Howard Archer, economist at IHS Global Insight, said: ``The construction sector is being helped to a limited extent by the Government bringing forward some infrastructure spending as part of its efforts to boost the economy.