UK construction sector grows for second consecutive month

Tuesday, July 2nd, 2013


The UK's construction sector grew for a second month in June, boosted by a rise in house building and supporting expectations that economic growth accelerated in the second quarter.

Growth in output and new orders pushed the Markit/CIPS construction purchasing managers' index (PMI) to 51 from 50.8 in May, where anything above 50 indicates expansion. It was the highest level since May 2012.

Companies reported rising levels of client demand and larger volumes of new work.

Economists said the positive data raised the chances of stronger second-quarter growth than the 0.3% in the first three months of the year.

The positive news will be welcomed by the Bank of England's new governor, Mark Carney, who will oversee his first monetary policy committee decision on Thursday.

"June's construction data is one of the final pieces in the puzzle when it comes to survey evidence for second-quarter UK economic performance, and the sector's upturn adds to the upbeat news flow ahead of Mark Carney's first policy meeting at the Bank of England later this week," said Tim Moore, senior economist at Markit.

Housing construction grew at the strongest rate in June according to the PMI, helped by the government's incentive schemes, although growth slowed to 51.5 from 54.4 on the index.

Commercial and civil engineering activity hit 50.1 and 50 respectively, improving after several months of contraction.

Employment in the sector rose for the first time since February and at the fastest rate since September, driven by the rising levels of new work and an improved outlook.

Howard Archer, chief UK economist at IHS Global Insight, said that although the positive survey reinforced the likelihood that the MPC will not announce additional stimulus this week, more quantitative easing was possible in August.

"This reflects our belief that Mark Carney is likely to be keen to build up escape velocity from extended economic weakness," he said.

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