THE construction industry has been given a much-needed boost by a return to growth in the demand for housing.
The Markit/CIPS Purchasing Managers’ Index, where a reading of more than 50 represents growth in construction activity, showed the sector grew at 54 in May, up from 53.3 the previous month.
A return to growth for housebuilding offset a marked decline in civil engineering work, leading to a bigger-than-expected acceleration in overall growth for construction.
Analysts said the figures suggest the construction sector, which makes up 6.8% of the total economy, will contribute positively to GDP growth in the second quarter after shrinking by 4% in the first three months of the year.
The report also suggested that construction firms were seeing a “marked expansion” in new orders.
New contract wins led to an overall increase in employment, although Markit said that the rate of job creation “remained modest”.
It added that house-building activity had improved after slowing in April, although the rate of increase was below the long-term trend. The month also saw a rise in input prices, mainly in the form of higher raw material prices.
Sarah Ledger at Markit said: “Positive sentiment regarding future business activity rose to a one- year high, although concerns over public-sector spending cuts continue to weigh on confidence.”
The construction sector has been one of the most volatile areas of the economy in recent quarters, swinging from strong growth in the middle of last year to contraction in the last quarter of 2010 and first quarter of 2011.
A further rise in new business and the release of previously mothballed projects supported the latest expansion in activity, the survey said.
There was further cheer as the survey reported the first increase in employment in the sector for 10 months.
Howard Archer, chief UK and European economist at IHS Global Insight, said that despite the figures, the construction sector still faces a challenging environment, which is likely to limit activity over the coming months.