UK construction sector expands at fastest pace in six years: Markit
Construction output in the United Kingdom accelerated at the fastest pace since September 2007, according to Markit Group. The October PMI reading of 59.4 exceeded forecasts, which called for a decline to 58.7.
PMI above 50.0 indicates growth, whereas a reading below the 50.0 mark signals contraction in the construction sector. UK construction PMI has been above the 50.0 mark since May.
Housing activity is the biggest catalyst behind October’s unexpected surge in construction output. The UK housing sector has been accelerating at a rapid pace. New home volumes across the UK jumped 19 percent in the third quarter, according to the National Housing Research Committee. Mortgage approvals reached a 5 ½ year high in September, according to the National Association of Realtors.
A strong housing sector is indicative of broader trends in the UK economy. Last week it was shown the UK manufacturing industry grew for a seventh consecutive month in October, due largely to export demand. National gross domestic product grew at the fastest pace in more than three years last quarter, prompting the Confederation of British Industry to raise its growth forecast this year and next year.
Construction companies said their outlook was boosted by growing consumer spending and brighter economic prospects across the economy. Construction companies reported increased output and new business opportunities in October, which created a spike in purchasing activity.
“UK construction output continues to rise like a phoenix from the ashes,” said Tim Moore of Markit Group. Growth in construction activity has fueled job creation. “The on-going growth of new business levels, climbing confidence and positive market conditions has resulted in the steepest rise in staffing levels for six years,” said David Noble of the Chartered Institute of Purchasing & Supply.
Construction activity is directly tied to expectations about future conditions. Housing growth has cooled from its fastest pace in nearly ten years, but remains the strongest sector in the economy. This means construction activity is likely to remain strong in the fourth quarter.
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