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UK Construction Activity Surges to 6 ½ Year High: Markit

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UK Construction Activity Surges to 6 ½ Year High: Markit

Construction activity in the United Kingdom surged to a six-and-a-half year high, led by the sharpest expansion in housing activity in more than ten years.

Markit Group’s gauge of UK construction output rose from 62.1 to 64.6 in January, far exceeding economists’ forecasts. UK construction PMI has been above the neutral 50 value that separates expansion from contraction for nine consecutive months.

Strong output growth was recorded in all three sub-sectors of the construction industry. Residential construction continued to lead the upturn in January, with the latest expansion in housing activity the sharpest in more than a decade. Meanwhile, commercial building projects and civil engineering activity expanded at the sharpest pace since mid-2007, Markit data showed.

The sharp rise in new business volumes supported job creation for the eighth consecutive month, which is the longest continuous period of uninterrupted job growth since early 2008. Combined with the steady pace of job creation in manufacturing last month, employment growth in construction adds further to the prospect of joblessness falling below 7 percent in the near-term.

“The construction industry has started 2014 in formidable fashion, enjoying its strongest growth in six-and-a-half years reinforced by a sharp rise in new business orders,” wrote Markit CEO David Noble in a statement. “Housing activity growth was the highest in a decade and remains the fastest improving area of construction.”

Although the government has announced plans to scale back the Help to Buy mortgage scheme, the January report suggests momentum in the housing sector remains elevated. The housing market last year helped drive the UK economy to its best annual performance since 2007.

According to Markit’s Tim Moore, the housing market’s ongoing resilience is attributable to “growing demand for new homes and improving confidence within the UK property market.”

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