UK construction industry posts eighth consecutive month of growth

Building_site_of_housingConstruction PMI for December came in above expectations, boosted by new commercial building projects

A range of new commercial building projects helped the construction industry expand again last month and companies are increasingly confident about the year ahead.

A survey of the sector suggested it was continuing to claw back ground lost during the downturn and finished 2013 with its eighth straight month of growth.

The Markit/CIPS UK Construction PMI came in slightly ahead of expectations with a headline activity reading of 62.1 for December. That was well above the 50-mark which separates growth from contraction but was down from 62.6 in November, which is the highest reading since mid-2007.

Construction companies said greater confidence in the economic outlook meant clients were spending more.

The survey indicated the biggest growth in commercial projects since 2007, before the financial crisis. Housebuilding remained the fastest growing area of the sector, echoing a pick-up in housing market activity and the government scheme to boost access to mortgages, the Help to Buy initiative. Separate data from the Bank of England on Friday showed mortgage approvals hit a new five-year high in November.

The construction survey suggested growth in December was broad-based and civil engineering also expanded.

Tim Moore, an economist at survey compilers Markit, said: “The latest survey highlights that construction companies enter 2014 with the wind in their sails. Most encouragingly, the improving UK economic outlook is helping boost private sector spending patterns, meaning that the construction recovery has started to broaden out from housing demand and infrastructure projects to include strong growth in commercial building work.

“Over half of all survey respondents anticipate increased output levels during the course of 2014, which is up sharply from one-in-three construction firms that expected growth at the same time one year ago.”

The construction poll follows Markit’s survey of the manufacturing sector on Thursday that suggested growth had slowed somewhat in December. But economists said the sector, which makes up around a 10th of the economy, likely notched up solid growth in the final quarter of 2013.

The construction sector’s latest signs of expansion also bode well for overall growth, said Howard Archer, economist at IHS Global Insight.

“Evidence that the construction sector is sustaining its recent markedly improved performance is obviously good news for overall growth prospects, although it needs to be remembered that the sector only accounts for 6.3% of national output,” he said.

“Nevertheless, the survey maintains hopes that the economy in the fourth quarter of 2013 could have at least matched the 0.8% quarter-on-quarter expansion achieved in the third quarter. Much will clearly depend on how well the services sector performed in the fourth quarter and how well consumer spending held up.”

The equivalent survey for the dominant services sector will be released on Monday. Economists expect the headline reading to edge up to 60.5 from 60 in November, according to a Reuters poll.

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