Winding down

Contractors continued to prosper in August, with the activity index remaining steady at 60 points.

However, both the orders index and the tender enquiries index fell by two points from July, to 71 and 58 respectively.

This has not prevented a high level of optimism surrounding short-term employment prospects, with the index unchanged from July at 58. Optimism regarding tender prices, however, has decreased slightly.

CFR’s Leading Construction Activity Indicator, which provides a short-term forecast of activity levels in the construction industry, indicates continuing growth in construction activity over the next three months, although the growth rate is set to decline over that period.

According to Experian’s latest forecasts, growth in the UK construction industry is forecast to be about 3.4% in 2004, a similar rate to GDP. It is then predicted to moderate to 2.5% in 2005, slightly lower than GDP growth, before dropping to 1.9% in 2006. The public sector is expected to initiate most of the growth over the forecast period, with both the housing and non-residential sectors likely to see very robust rises in output. Private housebuilding is also forecast to have another good year in 2004, but a weaker housing market from 2005 is likely to constrain growth thereafter.

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