Building trade the 'sick man' of the British economy, but reviving slowly

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The Independent Online

Hopes that the British economy will emerge from recession during this quarter were boosted yesterday by the release of figures suggesting that the severe slump in the construction industry had begun to bottom out.

While still in negative territory, suggesting a continuing contraction in activity, the latest survey of sentiment among managers in the sector by the Chartered Institute of Purchasing and Supply (CIPS) and the researchers Markit was moderately encouraging. Construction output dropped by a further 2.2 per cent over the period from April to June, having plunged 6.9 per cent in the first quarter. Construction output is down by 14.7 per cent on this time last year.

However, tentative signs of at least a temporary stabilisation in the housing market and efforts by the Treasury to boost infrastructure spending saw the overall index, which covers forward orders and employment prospects, rise to 47.7, up from 47 in July. A reading above 50 indicates expansion.

David Noble, the chief executive of CIPS said: "Although August saw a reduction in the rate of deterioration in the construction sector it is still the sick man of the UK economy."

Howard Archer, a UK economist at Global Insight, added: "While the purchasing managers' survey still points to contracting activity in the sector, it nevertheless indicates that construction output should be less of a drag on the overall economy. Even so, serious concerns remain."