Construction rising fastest for six years

CONSTRUCTION picked up speed last month, unexpectedly growing at its fastest pace since September 2007, a survey of purchasing managers showed yesterday.

The Markit/CIPS construction PMI rose to 59.4 in October, beating economists’ expectation that it would hold steady at September’s reading of 58.9.

The figures were the latest in a series of positive economic figures and followed a strong reading for the manufacturing sector on Friday.

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Economists will now turn their attention to today’s services PMI, which covers private-sector firms outside the retail sector and casts light on a much larger part of the British economy than construction.

Sterling rallied against the dollar after yesterday’s data and the brighter economic news caused the spread between British and German government bond yields to widen to its greatest since late September.

“UK construction output continues to rise like a phoenix from the ashes, with housing, commercial and civil engineering activity all seeing strong rates of expansion at the start of the fourth quarter,” said Markit economist Tim Moore.

David Noble, of the Chartered Institute of Purchasing & Supply, said: “The future is looking bright for the UK construction industry as it soars into the final quarter with its strongest performance in over six years, boosted by a strengthening surge in activity broadening out across all sec- tors.

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Housing remains the key driver of the ever-strengthening rebound in October, but with civil engineering and commercial works continuing to bolster their expansion. Particularly impressive is the commercial sector, which registered the fastest rate of growth since April 2012.

“The ongoing growth of new business levels, climbing confidence and positive market conditions has resulted in the steepest rise in staffing levels for six years.

“Caution on employment experienced in the first half of 2013 has now been replaced by rising expectations and a strong belief that growth can be sustained in the year to come.

“With demand picking up, delivery times are lengthening but there is optimism this will lead to a more bullish approach from suppliers, who up until now have been cautious on stock levels.

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“They now have the platform to level out the continuing squeeze on stock availability and operating capacity.”

Construction was one of the hardest-hit sectors of the economy in the aftermath of the financial crisis, as housing market activity slumped and the government and businesses axed building projects to save money.

But it has picked up this year, and in the three months to September it expanded by 2.5 per cent according to official data, the fastest rate since the second quarter of 2010. It is nonetheless a relatively small part of Britain’s economy.

“While evidence that the construction sector is continuing to gain momentum is good news for overall growth prospects, it needs to be remembered that the sector only accounts for 6.3 per cent of national output,” said IHS Global Insight economist Howard Archer.

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Housebuilding was the strongest sector of construction for another month.

“Of critical importance to the construction sector going forward is that the economy holds up well over the coming months and that housing market activity sees sustained healthy but not excessive growth,” Mr Archer said.

Property prices have been soaring, triggering concerns.

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