Construction sector expands again

Britain's construction sector expanded again in July with improved confidence and new orders, though employment fell for the second successive month.

The construction purchasing managers' index dropped to 53.5 in July from 53.6 in June, according to the survey from Markit and the Chartered Institute of Purchasing & Supply, but any figure above 50 indicates activity increasing.

Confidence among the country's builders also improved after hitting a six-month low in June with more firms optimistic they would be busier over the next year, but the degree of confidence is still weak compared to the past, Markit said. New business rose for the 17th successive month.

Sarah Bingham, economist at the research firm, added: "The subdued level of confidence regarding future business expectations reflects the challenging outlook for the UK economy, and therefore the construction sector."

The fall in employment largely reflected firms not replacing staff, Markit added, though there were some redundancies.

Economists welcomed the data, which followed recent official figures showing a return to growth of 0.5% in the three months to June after two quarters of shrinking output.

Howard Archer, chief economist at IHS Global Insight, said the expansion at a similar pace in July to June was a "relief", though he added the sector is hardly storming ahead and "clearly faces a challenging environment". Construction makes up 6% of the UK's GDP.

David Noble, CIPS' chief executive said: "A continued rise in new orders suggests that activity should be supported in the near-term, but confidence regarding potential activity growth for the next year remains relatively subdued.

"Subsequently, firms are purchasing only to meet current requirements and remain cautious about replacing leaving staff, as the general mood remains uncertain."

Civil engineers saw the sharpest increase in activity over the past month, the survey revealed, while residential construction contracted for a second month due to the weak housing market.

PA