Belfast Telegraph

Surprise growth for building sector but confidence wanes

By Peter Cripps

The UK construction sector enjoyed a surprise expansion last month but economists have warned of more challenges ahead as confidence hit a three-year low.

However recent Northern Ireland figures have shown the sector here has suffered sharp contraction over consecutive months.

A closely watched Markit/ CIPS survey, in which a reading above 50 represents expansion, hit a five-month high of 53.9, up from 50.1 in September.

Economists expected it to flatline around 50. The growth was driven by a surge in orders from businesses, with civil engineering broadly stagnant and housebuilding in decline for the fifth month in a row.

But confidence dropped to its lowest level since December 2008 amid government cutbacks and uncertainties about the strength of private sector demand.

The figures, although improved, will not allay fears the UK economy will contract in the final quarter of 2011, after woeful manufacturing figures released yesterday.

CIPS chief executive David Noble said the survey indicated that the sector had accelerated "at some pace after a broad stagnation in September" but was "nothing to get excited about".

He added: "Due to economic conditions, it may be some time yet before we start seeing the sustained growth the sector really needs".

Official figures released on Tuesday revealed the UK's GDP increased by 0.5% between July and September, up from the 0.1% rise in the previous quarter. But these were overshadowed by a Markit/ CIPS survey that showed the manufacturing sector contracted at the fastest rate since mid-2009 in October.

Inflation on goods rose markedly in October, having hit a 10-month low in September. It was driven up by the rising cost of fuel and raw materials.

Howard Archer, chief economist at IHS Global Insight, said the sector is "far from racing ahead and it clearly faces a challenging environment" as the government cuts spending on schools, hospitals and infrastructure.