A steady start to 2005

Contractors ended 2004 much as they had begun, with the activity index at 58 points. This was one point higher than the previous month, indicating a good rate of activity growth.

Both the orders index and tender enquiries index also increased by one point in December, putting the respective indices at 71 and 58 points.

But firms’ optimism about short-term employment prospects dropped for the second consecutive month, with the index falling three points in December to stand at 50. Optimism on tender prices, however, is unchanged from November with the index remaining at 68 points.

The Leading Construction Activity Indicator, which provides a short-term forecast of activity levels, points to continuing growth in construction activity over the next three months. However, the growth rate itself is set to decline slightly over the period.

According to Experian’s latest forecast, output prices are set to rise more slowly in 2005 than in 2004, with inflation predicted to run at 4.3% across the industry. This compares with an estimated inflation figure of 6.5% for 2004.

The greatest increase forecast for any sector in 2005 is in the commercial sector, where output prices are set to increase by 8% over the year.

The next largest output price increase in 2005 is forecast for private housing, but at 4% this is just a third of the inflation level estimated in 2004. As the housing market inevitably cools, this rate of increase is set to decline further.