Construction Sector Contracts and Job Losses Mount Even as Residential Sector Offers Glimmer of Hope

According to the latest seasonally adjusted CIPS/Markit Construction Purchasing Managers’ Index (PMI®), released today:

• The headline number was 46.2 in October. A figure below 50 indicates contraction.
• Sub-sector data showed growth in residential construction for a second successive month.
• Both the commercial and civil engineering sub-sectors registered contractions. The decline in civil engineering activity was the fastest recorded in seven months.
• Latest data showed that new business levels remained unchanged since September, ending a nineteen-month period of decline.
• Staffing levels at construction companies fell in October. The latest pace of job cuts was substantial and accelerated since September, as redundancy programmes continued to be implemented. Requirements for sub-contractors reduced markedly in October.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said:

“Further drops in commercial and civil engineering activity were the key drivers behind the bad news. A stabilisation in order books did little to support activity, while weak sterling and higher fuel prices added to constructors’ difficulties.

“Perhaps of most concern is the continued slashing of jobs at construction firms. The pace of job cuts actually accelerated in October as the current state of the sector means that many who have lost jobs will struggle to find something else before Christmas.”

Press Release: Markit Economics [PDF].

Note: The index is a “diffusion index”, it is calculated by adding together the percentage of respondents that reported an improvement plus half of the percentage that reported no change. Results will vary around the 50.0 “no-change” level. Readings above 50.0 signal an improvement, readings below 50.0 a deterioration. The greater the divergence from 50.0, the greater the rate of change anticipated by respondents.

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