Growth in Britain's construction industry cooled in January, driven by an easing in residential construction growth to its slowest pace in more than 1-1/2 years, a survey said on Wednesday. The Chartered Institute of Purchasing and Supply/NTC Research said its contruction purchasing managers' index fell to 55.5 in January from 57.2 in December even though optimism for the future hit a six-month high.

This was the 72nd consecutive month above 50, which divides expansion and contraction.

"Purchasing managers saw expansion in the construction sector slow down in January. Growth of housing and commercial activity eased, while civil engineering declined for a second month running," said Roy Ayliffe, director of professional practice at CIPS.The housing activity index fell to 54.9 in January from 56.7 in December, echoing recent data which have shown the UK housing market cooling down after more than five years of rapid increases in house prices.

New orders growth eased to its slowest pace in 2-1/2 years in January, the survey showed, even though firms anticipated a rise in orders in coming months.

Despite the slowdown in growth, the construction sector continued to add jobs. Nearly one fifth of construction companies polled said they had added new staff to cope with growing workloads.

The Bank of England raised base UK interest rates five times from November 2003 to 4.75 percent but has left them steady there since August. Most analysts expect policymakers to leave rates on hold for several months to come.

Copyright Reuters, 2005