This month's new-look Tracker finds the industry optimistic, according to Experian Business Strategies' construction activity survey. Plus overleaf, Experian's quarterly analysis of orders and output

Contractors' activity continued to increase at a steady rate in November, according to Experian Business Strategies' nationwide survey. Respondents were generally optimistic about the state of the industry, reporting higher order books than normal and an above-average number of tender enquiries during the month.

The outlook for employment was less positive, but a tentative expansion in employee numbers is possible, at least in some firms. Crucially, all four headline indices, incorporating results from all three sectors, remained in the positive zone (more than 50) in November.

The activity and tender enquiries indices did not change in November, standing at 53 and 58 respectively, suggesting steady activity growth and high, stable optimism about tender enquiries. More respondents reported above average levels of order books, improving upon the already rapid growth seen in October. The index rose one point to 66. The employment index remained at 51 for the second month running.

Focusing on the sectors (see graph below), most improved from October was the residential sector, with all four key indicators up in November. However, the highest index values, and therefore best prospects, were in the non-residential sector, despite falls in the activity and employment indices and stagnation in orders and tenders.

The least optimistic responses came from the civil engineering sector, where all four key indicators declined from October.

Short-term activity outlook (see graph)

According to Experian Business Strategies' Leading Construction Activity Indicator (see graph), construction activity will continue to expand over the next three months. The rate of increase is likely to accelerate initially before stabilising. The indicator incorporates

a range of factors, including past levels of activity, orders and tender enquiries to assess the industry's prospects over the next quarter. The rising projection through to February is influenced both by evidence that contractors' current orders levels are significantly higher than usual across the UK and by the respondents' optimism about future tender prices.

The indicator uses a base level of 50 - above that level shows an increase in activity, below that level a decrease.

Labour costs (see graph)

Compared with August, quarterly labour cost increases in the residential and non-residential sectors moderated somewhat in November, with 58% of respondents reporting increases of less than 5% (see bar chart below) compared with just 48% in August.

The number of firms reporting rises of 7.6% or more reduced from 67% in August to 24% in November.

Responses from civil engineering firms present a different picture, with more than 60% reporting labour cost increases in the highest bracket. Three months ago only 26% of civil engineering respondents reported they were witnessing annual increases of this size.

The next labour cost update will be in April. Next month we will assess how material cost increases are affecting the industry.

Regional perspective (see graph)

In November all regions reported composite indices (which measure activity, orders, and tender enquiries over the past three months) of 50 or above (see map left). Four regions' composite indices fell from October: the North-east, Yorkshire and Humberside, the North-west and Wales. Scotland, the East Midlands, the West Midlands and the South-east's indices all remained unchanged from the previous month.

Northern Ireland recorded the greatest increase in its composite index in November, rising 12 points to stand at 69. Only two other regions recorded a rise in their indices, the Eastern region and the South-west, each rising four points.

With a composite index of 76, Wales was the strongest performing region despite recording a five-point fall in its index. Yorkshire and Humberside recorded the largest decline in its composite index, which fell six points to 52. The North-east and North-west's composite indices also fell three and four points respectively.

The total UK index increased for the fourth consecutive month, rising two points to 68.