Housebuilders aid surprise rebound in construction

Latest purchasing managers’ index adds to hopes of sustained recovery

Britain’s construction sector enjoyed a rebound last month thanks to housebuilding hitting a 17-month high.

Industry leaders said the outlook remained positive despite concerns over rising costs as the closely watched Markit/ Cips construction purchasing managers’ index (PMI) rose to 56 for May. That was up from 53.1 a month earlier and well above economists’ expectations of 52.6. A reading above 50 typically denotes growth.

Housebuilding had a stand out performance last month, expanding at its fastest pace since December 2015 and bouncing back from a sevenmonth low in March.

New business also motored ahead, clocking its fastest expansion so far this year, while the number of new jobs accelerated for the second month on the bounce to its strongest level since January 2016.

Tim Moore, IHS Markit senbut ior economist, said the UK constructionsectorwasrecovering strongly after a sluggish start to the year.

He said: “House building was the key growth driver, with work on residential projects rising at the fastest pace since December 2015.

“A sustained rebound in residential building provides an encouraging sign that the recent soft patch for property values has not deterred new housing supply.

“Instead, strong labour market conditions, resilient demand and ultra-low mortgage rates appear to have helped boost work on residential development projects in May.”

Yesterday’s PMI report follows solid financial results frommajorukhousebuilders.

Stephen Profili, regional managing director for Lovell, part of Morgan Sindall Group, said: “The residential sector of the industry is continuing to perform strongly and this is reflected in these latest figures.

“Increasing costs due to the ongoing weakness of the pound are having an impact not enough to dampen the generally buoyant housebuilding sector.

“As a business, Lovell remains firmly focused on delivering the housing Scotland needs, with a strong emphasis on building new affordable homes in significant numbers.”

Despite sterling’s prolonged weakness, input prices for construction firms rose at the slowest pace for seven months.

Itcomesafteranupdatefrom the manufacturing industry on Thursday saw the sector ease back from a three-year high, but beat expectations in May thanks to robust growth in new orders. However, the pound remained under pressure in the wake of the construction numbers, dipping 0.2 per cent against the dollar to $1.285 and also easing against the euro.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the result suggested the Brexit vote’s “dampening influence on construction activity is fading”.

“Note, however, that the PMI has had to exceed 53 in the past to signal growth,” he added.

sreid@scotsman.com