Construction heads back into growth in October despite fall in confidence

Output in the construction sector edged into growth last month despite confidence sinking to a near five-year low.

Growth but no great strength in sector in the immediate future
Growth but no great strength in sector in the immediate future

The Markit/CIPS UK Construction purchasing managers’ index (PMI) showed a reading of 50.8 in October, up from 48.1 in September and above economists’ expectations of 48.5.

A reading above 50 indicates growth. While a robust performance from housebuilders helped drag the sector back into expansion, the industry’s performance was still tracking below the post-crisis trend of 54.7.

The report also fuelled concerns over the industry’s future, with the balance of companies eyeing a rise in activity over the next year slipping to its weakest level since December 2012.

It comes after official figures released last week showed the construction industry had gone into recession after falling by 0.7% between July and September - the lowest drop since the third quarter of 2012.

Sterling eased back following the announcement, falling marginally against the dollar to 1.324 and dropping 0.1% versus the euro at 1.138.

Tim Moore, associate director at IHS Markit, said: “Greater housebuilding was the sole bright spot in an otherwise difficult month for the construction sector.

“Sustained declines in civil engineering and commercial activity meant that large areas of the building industry have become stuck in a rut.

“Reduced tender opportunities and fragile demand are placing a dark cloud over the near-term outlook.

“October survey data indicated that UK construction companies are now the least confident about their forthcoming workloads since December 2012.”

Commercial building activity remained the thorn in the side of the sector, falling for the fourth month on the bounce amid growing concerns over the economic outlook and delays from clients.