More grim news from the construction industry emerged yesterday, as it leads the economy into a full-blown recession.

The latest survey by the Chartered Institute of Purchasing and Supply (CIPS) of the sector showed that construction activity contracted for the fifth successive month, with house building being especially badly hit – down for the eighth month in a row and standing at a record low.

Employment in the sector contracted at the fastest pace in more than 11 years. Cips survey readings below 50 indicate contraction; at 36.7 the Construction Purchasing Managers' Index (PMI) "showed a considerable fall ... since the previous month".

The Office for National Statistics recently identified weakness in the construction sector, despite being only 6 per cent of the economy, as the primary driver of lower growth in the economy during the second quarter of the year; the Cips data, regarded as a reliable indicator of future trends, suggests that more months of negative growth may be expected. Sharply negative growth here and in British industry is combining with stagnation in the bigger service sector to push the economy towards an actual shrinkage later this year, for first time since 1992.

Howard Archer, the chief UK and European economist at Global Insight, put the speedy drop in the index down to "housebuilders ... being hit extremely hard as ... house prices crumble in the face of elevated affordability pressures, very tight lending conditions and low buyer interest".