The heat of the moment

After a mid-summer dip, construction activity rebounded in August to its highest level for a year, with a 13 percentage point rise in the activity balance. Despite this, the outlook for the industry did not change much, with orders, employment, tender enquiries and tender price balances remaining stable.

There was a particularly strong increase in the activity balance for large firms, but a sharp fall in tender enquiries and less optimism about future employment and tender prices suggest a fairly subdued outlook. Meanwhile, small firms reported their first positive activity balance for more than two years.

Almost 70% of building firms reported that material costs had risen by less than 5% in the past year, although for the majority, the increase was between 2.5% and 5%. A third of firms still experienced rises of over 5%, but the survey suggests that costs are now rising more slowly.

As for the first half of the year, the latest official figures show that construction was extremely buoyant, with output growing at its fastest rate since 1988. All sectors except the industrial one are benefiting from the boom with the public non-residential and infrastructure sectors leading the growth.

As a result of the promising start to the year, upbeat expectations for public sector work and an improved outlook for consumer spending, CFR has revised up its forecasts. It is now predicting construction output growth of 4.4% this year, moderating to 3.8% in 2003 and 2.9% in 2004.

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. In addition to the results published in this extract, all of the monthly topics are available by sector, region and size of firm. Quarterly questions also seek information on materials costs, labour costs and work in-hand.