Construction index continues to signal rapid contraction of activity

The indicator, which is designed to provide a single-figure measure of trends in construction sector activity, shows the highest reading for three months, yet remains historically low and points to a monthly contraction in the UK construction economy.

Output dropped steeply in January, albeit at slower rates than during December. The weakest sector was housing.

After falling at a series record rate in December, the contraction in incoming new work to UK constructors eased sharply in January. However, with the majority reporting leaner order books, the rate of decline remained rapid.

Both employment and subcontractor usage took a considerable knock.

UK constructors continued to report falling input costs during the latest survey period, as weak global demand for raw materials pushed prices down. However, the rate of deflation eased for the second month running.

In spite of this, constructors were more optimistic in January regarding activity over the next year.

Roy Ayliffe, director of professional practice at the CIPS, said: “The remainder of this quarter will be important in ascertaining whether the rise in the indices in January was an aberration or a real sign of a turning point in the cycle.”