Housebuilding surge boosts growth

A surge by housebuilders helped construction activity grow at its fastest annual pace in four months in June, bucking expectations for a slowdown.

Housebuilding was the best-performing area of construction activity
Housebuilding was the best-performing area of construction activity

The monthly Markit/CIPS purchasing managers' index (PMI) jumped to 62.6 in June from 60 in May, its highest level since February and well above analysts' forecasts of a fall to 59.5. A reading above 50 represents growth.

The data boosted the pound, which rose yesterday to its highest level in nearly six years driven by manufacturing data which also beat expectations.

The report revealed the fastest pace in hiring in the construction sector since the survey began in April 1997, as economic conditions improved and business confidence has grown.

The survey has shown rising construction activity for the last 14 months in a row.

Housebuilding was the best-performing area of activity, with the rise in June the steepest since January. Commercial construction also rose at its most marked pace for five months.

Civil engineering was the only area of activity where growth slowed, in part due to the completion of flood relief work after heavy storms swept the country earlier this year.

The survey also noted the highest rise in construction material prices for six months as the industry gathers pace.

The construction data come as mortgage lender Nationwide said house prices across the UK had risen above the peak reached in 2007, after values climbed 1% in June and were up 11.8% from a year earlier.

Markit senior economist Tim Moore said: "The latest survey suggests that the UK construction sector has expanded by more than 1% over the second quarter of 2014, driven by improvements in the underlying health of the UK economy, favourable funding conditions and robust increases in new housing starts."

Howard Archer, chief UK and European economist at IHS Global Insight, said that, taken together, the construction and manufacturing data may lead the Bank of England to raise interest rates in late 2014 rather than early 2015.

Mr Archer said: "Not only do the surveys show strong activity, but they both also indicate a further marked rise in employment and a pick-up in price pressures."