Economic growth could be revised up

Britain's economic growth for the first quarter looks likely to be revised up to a near four-year high after official figures showed the construction sector performed much better than previously thought.

The ONS said construction grew by 1.5% in the first three months of 2014
The ONS said construction grew by 1.5% in the first three months of 2014

The Office for National Statistics (ONS) said construction grew by 1.5% in the first three months of 2014, up from a previous estimate of 0.6%.

It said that all else being equal, this could lift gross domestic product (GDP) growth for the period by 0.1% from its initial estimate of 0.8% to 0.9%.

This would be the best quarterly rate of growth for the UK economy since the second quarter of 2010, when it grew by 1%.

The figures also showed that the construction sector grew by 1.2% in April compared with the previous month.

Chris Williamson, chief economist at Markit, said taken together with healthy latest manufacturing figures, it suggested the economy was on course for another strong spell of growth in the second quarter.

Mr Williamson said it was "not just a housing market upturn" - while private sector housing activity grew 2.5% in April there was also a 3.8% upturn in private sector industrial work.

He said signs of a "booming" construction sector added to remarks from Bank of England governor Mark Carney on interest rates to suggest that a hike was more likely by the end of the year.

However the first quarter construction data also showed new orders fell sharply, dragged down by orders for new public housing which fell by 45.7% - which was the largest fall since records began in 1964.

The ONS said this might be because investment in housing associations was coming from private rather than public sources.

Howard Archer, chief UK and European economist at IHS Global Insight, said the figures provided "mixed news" but that while construction activity may have slowed from peak levels, its prospects "look generally bright".

It came as house building shares plunged on Mr Carney's remarks on interest rates and a strong signal that the Bank of England is likely to take action to cool the housing market later this month.