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Construction sector growing faster amid housebuilding surge

UK construction sector growth accelerated in August, as housebuilding activity continued to surge and civil engineering output expanded at a significantly faster pace, a survey has revealed.

The report, published yesterday by the Chartered Institute of Purchasing and Supply (CIPS), also showed the steepest monthly rise in rates charged by sub-contractors since the survey began in April 1997. The ­availability of sub-contractors fell at the fastest pace in the survey's history.

Further capacity pressures were evident in the sharpest monthly rise in supplier delivery times since the survey started more than 17 years ago.

The rate of hiring by construction companies in August was close to July's survey high.

CIPS's purchasing managers' index for construction, which measures activity across the housebuilding, commercial ­property and civil engineering sub-sectors, rose from 62.4 in July to 64 in August on a seasonally-adjusted basis. This rise signalled a significant acceleration in the rate of growth of UK construction activity from an already fast pace, with the PMI moving even further above the level of 50 that separates expansion from contraction.

The pace of expansion recorded in August was the fastest since January. CIPS noted that it was also the second-strongest rate of construction sector expansion since August 2007, the peak that preceded the recession of 2008/09.

Housebuilding has been buoyant in recent times, boosted by UK Government measures to stimulate the residential property market. These measures were put in place after Chancellor George Osborne's vision of a "Britain carried aloft by the march of the makers" failed to materialise, but they have led to increasing concerns over the unbalanced nature of economic recovery.

These fears were fuelled on Monday, when CIPS published a survey showing a sharp and unexpected deceleration of growth in UK manufacturing activity in August to its weakest pace in 14 months.

The survey indicated a slight slowing of the rate of housebuilding growth in August to a three-month low. Expansion of this sub-sector nevertheless remained rapid, with the housing activity index easing from 68 to 66.4. Civil engineering was a major contributor to the acceleration in overall construction sector growth. Commercial property construction activity meanwhile continued to expand at a strong rate.

Chris Williamson, chief ­economist at survey compiler Markit, said: "The strength of the data, in terms of both the pace of expansion and inflationary pressures being signalled, add to the case for interest rates to rise. However, with construction only accounting for six to seven per cent of the economy and manufacturing growth waning in August, it will need an especially buoyant picture in [Wednesday's] service sector PMI for any policy-makers to be comfortable in voting for higher interest rates."

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home improvement

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