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Residential housing sends UK construction sector to 6-year highs: Markit

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Residential housing sends UK construction sector to 6-year highs: Markit

Construction output in the United Kingdom accelerated at the fastest pace since August 2007, according to Markit Group.

The PMI reading of 62.6 is up 3.2 percentage points from the previous month. The median forecast of 17 economists surveyed by Bloomberg was 59.0.

The monthly data showed the residential housing market continues to drive UK recovery, with residential construction advancing at the fastest pace in ten years. UK home sales rose 6.5 percent in November compared to year-ago levels. Mortgage approvals also hit a six-year high in October. Construction companies noted the steep rise in house building activity, which suggests the residential real estate market will continue to drive expansion. The Bank of England acknowledged the success of the housing market by trimming mortgage incentives last month, opting instead to use the Fund for Lending initiative to spur small business growth.

Construction companies reported the fastest expansion of new work since September 2007, as overall business activity continued to boost sentiment. Rising volumes of new work contributed to the sharpest rises in employment and purchasing activity in more than six years. Companies reported the highest level of business optimism since September 2009, with more companies saying the overall business climate should continue to improve over the next 12 months.

Commercial construction projects and civil engineering activity also increased at a rapid pace, suggesting the construction recovery isn’t limited to the residential housing market.

“Construction activity continues to spring back to life during the final months of 2013,” said Tim Moore of Markit. “Sustained improvements in infrastructure and residential building helped keep the sector on a strong recovery path in November.”

Earlier in the week Markit said the UK manufacturing industry expanded at the fastest pace since February 2011. The international market data vendor will report on the UK’s service economy later in the week.

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