03 March 2006 | Rebecca Ellinor

UK construction activity picked up in February and confidence reached a 22-month high.

The latest CIPS purchasing managers' index (PMI) - a composite indicator of sector conditions in which an index above 50 means growth - recorded a reading of 51.9, a change on January's figure of 50.7 and indicating a modest level of growth.

Home-building activity increased last month with the housing activity index coming in at 52.9 - above the critical no-change value of 50 for the first time since September 2005.

Growth was also recorded in commercial activity, for the 41st month in a row. The commercial activity index rose to 51.5.

Civil engineering continued its negative trend, with activity falling at the sharpest pace since July 2004. The civil engineering activity index for February was 44.5.

Levels of new business received by UK construction companies rose in February. The seasonally adjusted new orders index posted a reading of 54.6, the highest since November.

The acquisition of new business and expectation that further contracts would be secured over coming months helped lift UK constructors' confidence to a 22-month high.

Input buying rose at a sharper rate than in January, mirroring the trend for new orders. High input prices, however, continued to dampen optimism among some panellists. Costs were reported to have risen strongly again in February, although the rate of inflation was well below January's 14-month high.

Roy Ayliffe, CIPS director of professional practice, said: "The pick up of pace in construction growth in February was a positive sign for the sector following a period of inactivity, particularly in the housing sector. The continuing rise in employment and an increase in new business leads are fuelling the optimistic outlook, despite soaring input costs."

* Coverage of previous months' PMI reports is available at www.supplymanagement.com/pmi

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