The latest monthly figures from Experian Business Strategies reveal that activity in the construction industry is showing no sign of weakening – with the exception of the civil engineering sector …
With the activity index at 56 points in September contractors’ activity continued to grow, and the two-point rise from August suggests the rate of increase accelerated. The orders index also rose in September by three points to 67. The tender enquiries index rose beyond 60 after increasing seven points to stand at 61.
In terms of the three-month moving average indices, the orders index rose a single point to 66 and the tender enquiries two points to 56. Firms’ optimism about short-term employment prospects improved in September, with the index rising three points to stand at 54. Optimism concerning tender prices did not change from August.
The Leading Construction Activity Indicator suggests construction activity will rise over the next three months.
After increasing strongly in 2004, construction output prices are set to rise more slowly in 2005 and by 2006 annual price inflation is likely to be running at just 0.6%. This slowdown is because of the fact that activity in the industry as a whole has slowed more rapidly and acutely than initially expected.
The most rapid increase will be in infrastructure – in contrast with the past decade, when inflation in the sector lagged behind total construction inflation by a wide margin.
A softening private housing market will ultimately affect price increases in the sector. Prices have risen more than 35% since the turn of the century and such rapid growth is unlikely to continue over the coming years. However, recovery is likely after 2007.
Civil engineering’s activity index declined further in September, dropping seven index points to 48. This means that activity in the sector fell for the first time since May. By contrast both the residential and non-residential indices increased. Activity was most buoyant in the residential sector as its index climbed six points to stand at 59. Non-residential’s index increased a single point to 58. After falling in August, the percentage of respondents reporting no constraints on activity rose in September. For 26% of respondents insufficient demand continued to be the most common problem. Bad weather was a factor for 4% of the contractors surveyed, with 7% affected by labour shortages, 3% by finance and 8% by other factors. Generally, with the exception of demand, the situation improved in September from August.
Civil engineering was the only sector to record a fall in its orders index in September, down 13 points. However, at 56 the index continues to indicate that orders are at above normal level. Non-residential’s index rose four points to 77 and residential’s index increased three points to stand at 65.
Civil engineering again was the only sector to record a fall in its tenders index in September, dropping one point to 56. The residential index, on the other hand, climbed nine points to 61. Non-residential rose four points to stand at 63.
The tender price index rose for the third consecutive month in the residential sector to 62. Civil engineering’s index increased most strongly, nine points to 72. A fall was, however, recorded in the non-residential index. It fell a single index point to 64.
Unanimous rises were seen in all three sectors’ indices in September. Non-residential’s index rose four points to 54, residential’s index increased two points to 53 and civil engineering went up one point to 54.
This an extract from the monthly Focus survey of construction activity undertaken by Experian’s Business Strategies division on behalf of the European Commission as part of its suite of harmonised EU business surveys. The full survey results and further information on Experian Business Strategies’ forecasts and services can be obtained by calling 0870-196 8263 or logging on to www.constructionfutures.co.uk
The survey is conducted monthly among some 800 firms throughout the United Kingdom and the analysis is broken down by size of firm, sector of the industry and region. The results are weighted to reflect the size of respondents. As well as the results published in this extract, all the monthly topics are available by sector, region and size of firm. In addition, quarterly questions seek information on materials costs, labour costs and work in hand