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Sunday 09th of January 2011
August 4, 2009    

Construction sector shows tentative signs of recovery

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by Kay Murchie

There are tentative signs that the construction sector is recovering after figures today revealed that the slowdown in activity eased in July to the slowest pace for sixteen months.

The CIPS/Markit Construction Purchasing Managers’ Index posted a reading of 47 in July, edging closer to the 50 mark which indicates growth.

The index is up from the 44.5 recorded in June and has soared from the record low of 27.8 earlier this year.

However, the index showed that job losses are still significant with over 25% of businesses reducing headcount last month.

Meanwhile, the slump in new orders eased in July and a slower decrease in commercial and civil engineering was reported, while optimism about the state of the sector in 12 months’ time rose to its highest level in over two years.

Commenting on today’s figures, David Noble, chief executive of the Chartered Institute of Purchasing & Supply, said: “Optimism is returning to the UK construction sector on the back of a perceived improvement in economic conditions.”

“Whilst the current situation still looks very bleak, an upturn looks much closer than it did just a few months ago. However, times are still tough as steep competition and difficult market conditions pushed the sector into its seventeenth month of retrenchment,” he added.

In other news today, the pound continued its gain against the US dollar. Sterling briefly reached as high as $1.7005 today - the highest level since October - before falling back to $1.6930.

Yesterday, the FTSE 100 and the pound both gained on the back of growing hopes for an economic recovery after a rise was reported in manufacturing activity and HSBC and Barclays boosted investors after announcing strong results.

For the first time in almost 18 months, there was a growth in manufacturing activity, benefiting unexpectedly from an influx of new orders - the fastest since November 2007.

Analysts at Calyon, the French investment firm, said there was “growing optimism that the UK economy will be able to shake off the shackles of recession faster than many had thought”.

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