Business

Housebuilding boosts UK construction again in June

House construction Image copyright PA
Image caption Construction output expanded at its fastest rate in four months, Markit has said

An increase in housebuilding helped the UK construction industry to grow at its fastest pace for four months in June, a survey has suggested.

The Markit/CIPS purchasing managers' index (PMI) for the sector rose to 62.6 in June from 60.0 in May.

The reading beat analysts' forecasts for a fall to 59.5. A measure above 50 indicates growth in the sector.

Construction firms also hired new staff at the fastest rate since the survey began in 1997.

Housebuilding was once again the fastest-growing element in the construction sector, seeing the biggest expansion in activity and the fastest growth in new orders since January.

Markit said accelerating house prices, low interest rates and strong demand continue to encourage housebuilders to launch new housing developments.

The construction data comes as mortgage lender Nationwide said house prices across the UK had risen above the peak reached in 2007, after values climbed 1% in June and were up 11.8% from a year earlier.

'Solid month'

The Markit/CIPS survey found the commercial property sector, which faced near collapse following the 2008 financial crisis, also saw an increase in activity last month.

"(This) represents a remarkable yardstick of progress as the sector looks to recover the ground lost over the past seven years," said Markit senior economist Tim Moore.

He added the construction data over the second quarter pointed to the sector growing by more than 1% over the three-month period.

Official data released last week showed the growth in UK's construction industry rose by 1.5% in the first three months of 2014 and was 6.7% higher than a year earlier - the biggest annual rise in three years.

The construction industry contributes a relatively modest 6% to economic growth.

However, David Tinsley, UK economist at BNP Paribas, said the figures - together with Tuesday's strong manufacturing figures - indicated a "very solid month" for the economy in June.

"Particularly marked in the release was another acceleration in employment gains, with the index rising to its highest level in 17 years," he said.

Howard Archer, chief UK and European economist at IHS Global Insight, said the construction figures added to recent data that suggested economic growth in the second quarter was even stronger than the 0.8% seen in the first three months of the year.

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