UK construction ekes out growth in October - Markit

LONDON Fri Nov 2, 2012 3:40pm GMT

Workers construct residential homes at a building site in north London September 6, 2012. REUTERS/Neil Hall

Workers construct residential homes at a building site in north London September 6, 2012.

Credit: Reuters/Neil Hall

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LONDON (Reuters) - The British construction sector eked out growth in October, but new work and employment shrank and firms remained cautious about future business, a survey showed on Friday.

The Markit/CIPS Construction Purchasing Managers' Index (PMI) rose to 50.9 from 49.5 in September, just above the 50 line that separates growth from contraction. That is the highest reading since July and better than the forecast 49.1.

However, new orders fell for the fifth straight month - the longest period of decline since the 2008-2009 recession - and firms reduced headcount at the fastest pace since August 2011.

"The bigger picture remains bleak," said Tim Moore, senior economist at Markit, which compiles the survey.

"The year-ahead business outlook was still relatively subdued during October, as survey respondents cited weak spending patterns and squeezed budgets among clients," he added.

Input price inflation sped up in October compared to September, mostly driven by higher fuel and energy costs.

Within the sector, only civil engineering output rose, with residential and commercial work declining, Markit said.

Still, earlier data from construction industry analysts Glenigan raised hopes that the sector might pick up.

The value of building projects started between August and October was broadly flat compared to a year ago, but activity would have been far worse had it not been for a 58 percent jump in private housing projects, the analysts said.

They added that the Bank of England's Funding for Lending Scheme, in which it provides cheap funding to banks if they keep up lending to households and businesses, was beginning to have some positive impact on credit conditions and house builders started new projects in anticipation of more sales next year.

(Reporting by Li-mei Hoang and Olesya Dmitracova; Editing by Hugh Lawson)

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