Slow but sure

July was another good month for contractors, with a one-point rise for the second month in succession, edging the activity index up to 60.

There was little change in either orders or tender enquiries, with the indices remaining unchanged and falling a single point respectively.

A rise of three points in the employment index shows that firms are increasingly optimistic about short-term prospects. There is similar optimism regarding the short-term future of tender prices.

The building sector recorded a second consecutive rise in the number of firms experiencing large increases in material costs, with 22% of firms reporting cost escalations of over 7.5%.

CFR’s Leading Construction Activity Indicator, which provides a short-term forecast of activity levels in the industry, indicates continuing growth in construction activity over the next three months, but with the growth rate declining slightly over that period.

According to the latest data from the DTI, new work construction orders in the UK increased by 1.4% between the first and second quarters of 2004 and were up 14% on the second quarter of 2003, in constant prices. The greatest quarter-on-quarter increase in orders was recorded by the infrastructure sector with 68%. However, infrastructure orders were down 9% year on year.

On the regional front, the strongest growth in activity levels last month was in northern England. Order books were strongest in Wales.