Construction sector returned to growth in January

Better weather boosts construction sector

The construction sector returned to growth in January as it rebounded from the disruption caused by December's snow, but could still be facing a year of uncertainty.

The latest Markit/CIPS Purchasing Managers' Index (PMI) survey - where a reading above 50 indicates growth - rose to 53.7 in January from 49.1 in December, as better weather conditions provided a boost to the industry.

All three sub-sectors - housebuilding, civil and commercial - saw an increase in activity in January for the first time since August but the number of people employed in the industry fell for the seventh month in a row as “an air of caution” hung over the sector.

The sector still faces a difficult time ahead as the uncertainty over the economic recovery, the rise in raw material costs and VAT means it “may be looking at another disappointing year with continued uncertainty where hopes are dashed”, said the survey.

The construction sector, which had helped to lead economic growth in the second and third quarters of 2010, slipped into decline in December for the first time since February.

But January's figures saw a return to growth in activity, with civil the strongest performing category, while housebuilding brought an end to a four-month period of contraction and commercial grew for the 11th month in a row.

Confidence was at an eight-month high but still at half the levels seen before the financial crisis.

However, the overall picture for the past two months is one of modest growth, well below the rate seen in the first half of last year.

Markit chief economist Chris Williamson said the UK construction sector showed a welcome bounce back from the snow-related drop in activity late last year.

“However, after estimating for the boost to activity in January resulting from the disruption to workflows in December, the underlying growth trend remains only very modest and well below the surging pace seen in the second quarter of last year.

“The outlook appears to be one of nervous optimism. This nervousness about future prospects was highlighted by a disappointing further reduction in employment.”

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