A subdued summer

the contractor’s activity index stood at 53 in May, down from 55 in April. In June, it fell again to 52 – still growing, but only just. The orders index recorded a rise in June, whereas the tender enquiries index suffered a fall, leaving their respective indices at 64 and 54 points.

Firms were pessimistic about their short-term employment prospects, with the index falling one point to stand at 49. Optimism concerning tender prices, however, recorded a sharp increase; the index climbed six points to 63.

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

In 2004 price inflation in construction output was 7.3%. In the short term, prices are expected to continue upwards but at a more subdued rate. Overall, industry inflation is forecast to be 2.2% in 2005 and 1.9% in 2006.

From 2006 output price inflation will accelerate, with an annual growth rate forecast to exceed 3% between 2007 and 2010. Rapid inflation is expected in the infrastructure sector, with prices forecast to be 25% higher in 2010 than in 2005. Public housing and commercial construction output prices are also expected to increase substantially. Conversely, the current slowdown in the UK housing market will be a significant constraint on private housing output inflation over the forecast period.