The latest Markit/CIPS UK Construction PMI has revealed that despite stagnant employment and a decline in sub-sector output, there is a marked increase in confidence regarding future business activity.

January date signalled a thirteenth monthly rise in UK construction sector output. However, the rate of expansion eased and was modest. The weaker increase in activity was led by a slowdown in new order growth, with some panellists also noting the completion of existing contracts. 

Furthermore, employment stagnated. Despite this, confidence strengthened to the second-greatest degree in the survey history to reach an eight month high. 

The seasonally adjusted Markit/CIPS Construction Purchasing Managers' Index (PMI) posted 51.4 in January, down from 53.2 in December. The latest reading pointed to growth of UK construction sector output. However, the rate of expansion slowed to the weakest in four months, and was below the long-run trend.

Two of the three broad construction categories monitored - housing and civil engineering - registered decreases in output in January. The rates of decline were marginal and broadly similar in both sectors. Commercial activity rose for a twenty-third consecutive month. The expansion was solid and slightly faster than in December.

Sarah Bingham, economist at Markit and author of the UK Construction PMI, said: "2012 started positively for the UK construction sector, with further output growth recorded. 

"However, at a four-month low the expansion was modest, reflecting a weaker rise in the volume of new business received compared with December. Furthermore, growth was focused on commercial construction, with house building and civil engineering activity levels both falling slightly."

Commenting on the report, David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: "It's clear that many businesses have replenished their levels of optimism and have high expectations for improving economic conditions and new contracts.

"This confidence bodes well for the year ahead, although this visibility over potential new business will need to convert quickly into tangible work if employment levels are to improve."