HOUSING is still the "Achilles' heel" of the construction industry, despite the rate of contraction in the sector easing up slightly in August, new data has revealed.
The latest report from the Chartered Institute of Purchasing and Supply (CIPS) showed that the key measure of the industry's activity registered 40.5 last month.
That was up from July's survey low of 36.7 but firmly below the neutral mark of 50, i
ndicating a further sharp fall in the sector.
Housing registered just 27.2 on the construction purchasing managers' index (PMI), considerably lower than both the annual and long-run averages.
Respondents said supply was outstripping demand for construction work and competition for new contracts was high.
But on a more positive note, new orders, employment, sub-contractor usage and purchases all contracted at slower rates than in July, while input price inflation eased further.
Howard Archer, chief economist for Global Insight, said: "Although the construction purchasing managers' survey for August showed some improvement compared to July, it is still a very weak report which indicates that the sector remains in a bad way."
He said that the industry would be looking to yesterday's government announcement on stamp duty to alleviate some of the pressure on housebuilders.
Purchasing activity, staffing levels and sub-contractor usage were reduced further – although at weaker rates than in July, as new orders and activity levels fell and employers stopped investing in new staff and raw materials.
But, adding to the overall gloomy picture, input price inflation, although slower than in July, persisted at a high level, posting a reading of 78.5 – markedly above the expansion mark of 50.
Archer added: "The modest improvement in the August purchasing managers' survey does not significantly dilute belief that the construction sector is now firmly in recession."
Roy Ayliffe, director of professional practice at CIPS, said: "Housing was again the Achilles' heel of the construction sector, as August data signalled nine consecutive months of housebuilding decline.
"In an attempt to cope with the onslaught of rising prices, difficult trading conditions and narrowing confidence, purchasing managers were forced to further reduce levels of procurement activity, while more jobs were axed."
Gemma Wallace, economist at Markit Economics, which co-compiled the report, added: "Weaknesses, manifested as the credit crunch and global economic downturn which took hold over the past year, were still evident throughout the UK construction economy in August."
The full article contains 407 words and appears in The Scotsman newspaper.
