The UK construction sector expanded at the fastest pace in 17 months in May as low interest rate and strong labor markets underpinned residential building activity.
The Purchasing Managers' Index for the construction sector advanced unexpectedly to 56.0 in May from 53.1 in April, survey results from IHS Markit and the Chartered Institute of Procurement & Supply showed Friday.
The score was forecast to fall to 52.6. The reading signaled the fastest growth in the construction sector since December 2015.
While the headline index signaled robust growth momentum during May, the latest reading was still much weaker than the post-crisis peak seen in January 2014, the survey showed.
Eduardo Gorab, an economist at Capital Economics, said the survey added to the evidence suggesting that the slowdown in the first quarter GDP was a blip rather than the start of a new, weaker trend.
The improvement in May was driven by the fastest upturn in residential work since the end of 2015. Respondents cited a strong pipeline of new development projects and resilient underlying demand conditions.
May data also pointed to solid rises in civil engineering and commercial building. Although commercial development remained the weakest performing sub-category, the current growth was the fastest since March 2016.
The survey revealed a sustained recovery in new work, following the soft patch seen during the first quarter of 2017. Nonetheless, respondents noted that heightened economic uncertainty continued to act as a brake on client spending.
Increased workloads underpinned a further marked rise in employment numbers across the construction sector. The rate of job creation was the strongest since January 2016.
Further, the survey showed that there were more positive developments in terms of cost inflation, as overall input prices increased at the slowest pace for seven months.
Survey respondents reported that the weak exchange rate had led to intense negotiations with suppliers, but some noted that the peak phase of price hikes for imported materials had now passed.
by RTT Staff Writer
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