(RTTNews) - The UK construction sector remained firmly in recession in October with activity contracting for the twentieth month. Meanwhile, the pace of decline accelerated for the second consecutive month.

The CIPS/Markit construction purchasing managers’ index fell to 46.2 in October from 46.7 recorded in September, survey data released by the Markit Economics showed Tuesday. Economists had expected a reading of 47.2. A PMI reading below 50 suggests contraction in the sector. Construction sector posted its twentieth successive month of contraction in October. Markit economist Sarah Ledger said the current fall in UK construction sector activity remained relatively modest, compared to data recorded at the height of the downturn.

Sub-sector data showed growth in residential construction for a second successive month. However, this trend was not mirrored within the commercial or civil engineering sub-sectors, where further contractions were recorded. The decline in civil engineering activity was the fastest recorded in seven months.

“The fact that the sector took another turn for the worse this month just highlights how fragile it still is,” said David Noble, chief executive Officer at the Chartered Institute of Purchasing & Supply.

New business levels in the construction sector remained unchanged since September, ending a nineteen-month period of decline. Whilst some panelists reported that tenders for business were proving successful, these were offset by other comments of financial constraints at clients.

With activity levels falling further, purchasing volumes decreased, with the pace of reduction accelerating since September to the fastest in four months. Construction companies continued to cut headcounts in October. Requirements for sub-contractors reduced markedly in October.

Input prices increased in October for the first time in a year, as higher fuel prices and unfavorable exchange rate movements resulted in rising costs. Optimism over further business prospects remained high during the month. Survey participants reported that they expected recovering economic conditions to boost demand and expenditure.

On Monday, Markit said UK’s seasonally adjusted manufacturing purchasing managers’ index rose to a two-year high in October, boosted by a rise in output and new orders. Various housing market reports for the UK showed continuing increase in house prices recently. Hometrack said its house price index rose for a third month in October, while the Nationwide Building Society said its house price index rose for a sixth time.

“With the anticipation of a recovery in economic conditions, optimism over future business activity remained high,” Ledger said. The European Commission on Tuesday said it expects the British economy to expand 0.9% in 2010 and 1.9% in 2011.

According to a preliminary estimate from the Office for National Statistics, the British economy contracted 0.4% sequentially in the third quarter, after shrinking 0.6% in the second quarter. It was the sixth quarterly fall in gross domestic product. Thus, the economy suffered its longest streak of contraction on record.

The Bank of England, which is due to review its monetary policy on November 5, is expected to hold its key interest rate at a record low of 0.5%. The central bank is also expected to expand its asset purchase scheme from the current GBP 175 billion as the economy unexpectedly contracted in the third quarter.

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