Construction firms more upbeat despite slower growth

A construction worker walks at a site being demolished to make room for new apartment buildings in central London November 21, 2011.

LONDON (Reuters) - Britain's construction companies have grown more optimistic about their business prospects for this year despite a slower expansion in activity in January, a survey showed on Thursday, adding to hopes that the economy may avoid recession.

The headline Markit/CIPS construction Purchasing Managers'Index fell to 51.4 from 53.2 in December as growth in new ordersslowed and some existing contracts were completed.

That was below analysts' forecasts for a drop to 52.6 andthe weakest rate of expansion in four months.

However, the component measuring firms' confidence aboutbusiness over the next year rose to an eight-month high, helped by what they said were improving economic conditions.

"This suggests that growth may pick up again in the sectorin coming months and, on top of the surprisingly strong start to2012 reported by the sister survey of manufacturing, will raisehopes that a slide back into recession may yet be avoided," saidSarah Bingham, economist at data compiler Markit.

The PMI survey of manufacturing on Wednesday showed that thesector unexpectedly returned to growth last month.

Britain's economy contracted in the final quarter of 2011,as manufacturers and construction companies scaled backproduction. If followed by another consecutive quarter ofcontraction, that would amount to a recession.

Growth in the construction sector, which accounts for some 8 percent of the total economy, was driven by commercial building in January, with activity in house building and civilengineering shrinking slightly, Bingham said.

The resulting overall increase in output was not enough tosustain job creation, and employment in the construction sectorstagnated, she added.

Input costs rose markedly in January on the back of higherraw material and energy prices, although the rate of inflationeased.

(Reporting by Olesya Dmitracova)