Growth in UK construction offers relief

Julian Harris
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POSITIVE growth figures from the construction industry provided some relief for the UK’s struggling economic recovery, yesterday.

The building industry edged up to a score of 54 in the purchasing managers’ index (PMI) for May, a modest rebound from April’s disappointing score of 53.3.

All PMI scores above the no-change 50 mark indicate economic growth.

Input price inflation remained “at a historically elevated level,” the report said, despite easing slightly from April’s reading.

“It remains to be seen whether a marked expansion of commercial projects will help to replace what has been lost elsewhere in the coming months,” said David Noble of the Chartered Institute of Purchasing and Supply (CIPS), referring to impending government spending cuts. “But it

has contributed to a small improvement in confidence.”

Business expectations grew to a one year high of 66.8 in the index, with employment growing for the first time since June last year.

The employment index measured its healthiest reading since March 2008 (51.3), with commercial sector construction creeping upwards to a respectable 55.8 – helping to offset an unwelcome contraction in civil engineering activity (46.9).

“New order growth was marked, suggesting that increasing levels of output will be sustained,” added Sarah Ledger of Markit, which compiles the data alongside CIPS.

Growth in new orders accelerated to 56.3.

“But it needs to be borne in mind that the construction sector only accounts for 6.8 per cent of UK GDP,” warned Howard Archer of IHS Global Insight.

Progress in the UK’s largest sector – services – is published today, with chancellor George Osborne hoping for signs that the UK’s recovery remains on track.