Builders boom with record rise in job creation
THE CONSTRUCTION industry is still roaring ahead in the UK, according to a major market survey, with no sign of any slowdown as the second half of the year began.
Building firms were more confident than expected in July, according to Markit’s purchasing managers’ index (PMI), which came in at 62.4, only slightly down from June’s reading.
Any figure above 50 signals that the sector is generally confident, and the score has now been at or above 60 for nine months, for the first time ever.
“To put this into perspective, the index is well above its lifetime average (1997-2014) average reading of 54.3,” said Howard Archer of IHS Global Insight.
House building output rose at the fastest pace in more than a decade last month, and job creation rose at the fastest pace since the survey began 17 years ago.
Despite the extremely strong figure from house builders, the sector is rising from a very low base. Only 109,370 housing completions were recorded in England during 2013, barely a third of the 300,000 that many analysts suggest the UK as a whole needs to build each year.
Though official pay growth figures are still anaemic, Markit’s survey showed that rates charged by construction industry sub-contractors climbed at the most rapid pace on record too, adding to the pile of private data which suggests that wage growth should soon begin to feed into the official data.
“Strong growth, rapid employment gains and falling slack should push the Bank of England to hike rates in November this year,” said Robert Wood of Berenberg.
Wood continued: “The torrid pace of expansion in construction is clearly eroding slack with sub-contractors charges rising at a near-survey record pace.”
Though the UK economy is now back to a record size, the construction sector is still more than 10 per cent smaller than it was in the first quarter of 2008, before the onset of the recession.
The manufacturing sector’s PMI, announced at the end of last week, came in at 55.4 for July. Though the sector’s firms are still reporting growth, the core was at its lowest level in a year. The equivalent figure for the UK’s services sector will be published today.