A cool summer

Contractors’ activity continued to grow in May, although at a slightly reduced rate as the activity index fell two points to 53.

The tender enquiries index climbed two points from April to 56, while the orders index was down two points to 62.

Optimism surrounding the short-term employment prospects in the industry is slightly increased, with the index up one point from April at 50. Optimism regarding tender prices, however, decreased in May, down four points to 57.

The Leading Construction Activity Indicator, which provides a short-term forecast of activity levels in the construction industry, indicates growth in construction activity will continue at a similar rate over the next three months, with marginal but consistent increases expected.

Over the longer term, the latest forecast for the UK construction industry from Experian’s Business Strategies division show this subdued picture is expected to extend well beyond the next three months. After three years of robust annual growth, sub-GDP growth of 1.3% and 1.8% is forecast for 2005 and 2006 respectively.

A weakening housing market and growing economic uncertainty will curtail private construction output, particularly in residential and industrial sub-sectors. Public sector investment will be the primary driver of what growth there is during this period. In 2007 momentum will increase. Strong growth in civil engineering and recovery in private housebuilding will contribute to a healthy overall rise of 3.8%.