UK construction growth edges higher in August

UK construction growth edges higher in August

Positive PMI data raises hopes that building sector can make stronger contribution to economic growth

Britain’s construction industry expanded at a healthy pace in August, according to the key survey of the sector, boosting hopes that economic growth remained resilient into the third quarter.

The monthly purchasing managers index, from the Chartered Institute of Purchasing and Supply, jumped to 57.3, from 57.1 in July, well above the 50 mark that signals expansion.

“UK construction companies remained in recovery mode during August, with business activity and employment levels both expanding at a strong pace,” said the data firm Markit, which carries out the survey.

The fastest expansion in activity was in the housebuilding sector, but the outlook for commercial building work had also improved, according to the companies surveyed. “Survey respondents widely linked the latest upturn to improving economic conditions and strong demand from private sector clients,” Markit said.

Howard Archer, of consultancy IHS Global Insight, said: “The improvement in housebuilding in August reported by the purchasing managers after a dip in July will be welcomed by the government, which is currently prioritising the sector to deal with the UK’s serious housing shortage.

He added that if official figures bear out the positive news from the survey, construction could be set to make a stronger contribution to economic growth in the third quarter of 2015, after expanding by a modest 0.2% from April to June.

Output from the key construction sector collapsed dramatically during the deep recession that followed the global financial crisis of 2008, and its revival is regarded as crucial to sustaining Britain’s economic recovery.

Stefan Friedhoff, Global Corporates’ managing director for construction at Lloyds Bank Commercial Bank, said: “There is an increasingly positive feeling in the sector as firms continue to get a clearer handle on inflationary pressures, a tight labour market and growing demand. That sentiment is reflected in Wednesday’s data.”

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