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01/ STATE OF PLAY

The construction activity index peaked at a five year high in June; the following month saw a reversal as activity edged downwards by two points to 57. Activity fell in the residential and civil engineering sectors, the former was down by one point to 59, while the latter saw a significant 28 point drop to 56. Elsewhere the civil engineering sector remained unchanged in July from the previous month at 58 points.

The orders index added four points from the June figure taking it to 58, the highest value since February 2008. This was the first time since July 2007 where the index has shown above average orders for the time of year.

The percentage of respondents indicating that they were experiencing no constraints on activity increased for the fourth consecutive month, reaching 34% in July. In line with this the proportion indicating that financial constraints were hampering activity fell to 12%. Bad weather and material/equipment shortages remained minor worries while labour shortages were of concern, as 5% of respondents felt it was affecting their activity levels.

Finally insufficient demand continued to be the factor that respondents felt most constrained their activity, with 43% reporting so.

In July the employment index picked up by two points to reach 52, which indicates that businesses expect employment levels to increase over the next three months. Until now the index has shown declining levels of employment every month since December 2007.

The tender prices index remained at 56 in July indicating that firms are expecting the prices they charge to increase over the coming three months.

02 / LEADING CONSTRUCTION ACTIVITY INDICATOR

CFR’s Leading Construction Activity Indicator fell by two points last month to reach 57 following a five-year peak of 59 in June. It is expected to remain well above the no-change mark of 50 in the next few months.
The indicator uses a base level of 50: an index above that level indicates an increase in activity, below that level a decrease.

03 / LABOUT COSTS

The percentage of building firms reporting falling labour costs declined for the third consecutive quarter in July to just 18%. About 24% of respondents indicated that they had experienced annual labour cost inflation of less than 2.5%, down 6% from three months ago. The percentage of respondents indicating that their labour costs had risen by between 2.6% and 5% rose to 35%, while the percentage of respondents indicating that their wage bill had risen by between 5.1% and 7.5% increased to 6% from none three months ago. The share of firms reporting labour cost inflation over 7.6% increased by 6% in July to 18%.

04 / REGIONAL PERSPECTIVES S

Experian’s regional composite indices incorporate current activity levels, the state of order books and the number of tender enquiries received by contractors to provide a measure of the relative strength of each regional industry.

In July six out of eleven regions saw their indices increase. Scotland saw the largest upside with an eight point increase to 56, taking it into positive territory for the first time in 13 months. Yorkshire & Humberside and East Anglia both saw significant increases; the former was up four points to 71 while the latter bettered its June figure by three points, taking it to 61. Northern Ireland (41) and the East Midlands (58) were up by two points and one point respectively. The North-east and North-west remained unchanged at 61 and 52 respectively.

The remaining four regions and devolved nations all saw falls in their indices. Wales saw the sharpest drop, down nine points to 34. The South-west and West Midlands fell three points reaching 50 and 51 respectively. The South-east also saw a drop, albeit by one point to 61.

As a whole the UK index, which includes firms working in five or more regions saw its index edge up by two point to reach 52.