The construction sector in the UK appears to be brushing off the impact of the credit crunch relatively well, a survey released yesterday found.
The monthly purchasing managers index from the Chartered Institute of Purchasing and Supply rose to 56.0 in December from 54.3 in November.
The increase was unexpected. Analysts had predicted the PMI to decline again in December to 53.5, from November's 14-month low.
CIPS said there was marked growth in both the commercial and civil engineering sub-sectors.
Overall, construction orders picked up modestly in December, climbing to 58.8 from 58.6 in November.
However, it said firms signalled a reduction in residential construction activity for the first time since August 2006
The housing activity index retreated markedly to 46.5, indicating contraction in the sector.
Howard Archer, chief UK and European economist at Global Insight, said: "This indicates that housebuilders are very wary about the outlook for the market, as the evidence mounts that it is now cooling markedly.
"Indeed, overall confidence in the construction sector was at its lowest level since September 2001 in December.
"The pick up in overall construction activity is unlikely to deter the Bank of England from cutting interest rates again in the near term, given that the sector only accounts for some six per cent of GDP."
Dominic McAra, a director in accountant Ernst & Young's building products team, said: "These figures are a good indicator for the local construction and construction products companies and show that larger projects are still generating activity despite a tougher economic environment.
"We have seen, however, that a number of firms are now anticipating a sharper downturn in the housing market and this may constrain sales growth in the sector for 2008."
Meanwhile, a report by Ernst and Young and the Construction Products Association revealed that, despite industry growth remaining firm during the fourth quarter, manufacturers anticipate weaker figures.
As the housing slowdown begins to impact on both light and heavy construction, the industry returned a growth score of 69 for the final quarter of 2007 - the lowest of the year. Above 50 indicates growth and below 50 indicates decline.
Maren Baldauf, economist for the Construction Products Association, said the findings indicated that, despite plenty of activity across the industry, the prospects looking forward gave some cause for concern.
He added: "Both heavy and light side firms now anticipate that the sharper than expected downturn in the housing market will constrain sales growth next year.
"Significantly, heavy side firms for the first time this year are more optimistic than light side firms because of the expected recovery in infrastructure activity, mainly due to a recovery in water companies' investment and rail improvement programmes."
