New construction orders hit lowest level since 1980

The construction industry, like the manufacturing sector, appears to be experiencing a slowdown.

Figures from the Office for National Statistics yesterday indicate that new orders in the second quarter of 2011 fell by 16.3 per cent from the first three months of the year. They also suggest that the total volume of new construction project orders has hit its lowest level since 1980.

The ONS new orders data tend to be volatile, jumping around from quarter to quarter, but this is an unusually large decline. A slightly less alarming picture of the sector was provided by the latest Markit/Chartered Institute of Purchasing and Supply (Cips) construction index, which is based on a survey of the purchasing managers of building firms. This showed that the construction industry continued to expand in August, although the pace of growth slowed, with the index slipping to 52.6 from 53.5 the previous month.

The Markit/Cips reading is the lowest since the construction sector returned to growth eight months ago. And unlike their counterparts in the manufacturing sector, construction managers reported an increase in input costs in August.

The drop in the ONS figures is attributed to a sharp decline in government construction orders. Public sector housing and non-housing orders both dropped more than 30 per cent from the previous quarter.

Both sets of figures will add to fears that the UK economy could be about to slip back into recession. David Noble, the chief executive of Cips, said: "Reality is continuing to bite in the UK construction sector, as worries over wider economic conditions contribute to a slower rate of output growth... Though overall activity is still in growth territory, there may be some question about whether this will continue for much longer."