UK Construction Slows Down But Still Growing

British construction grew at the slowest pace in seven months in May but economists said the outlook remained strong amid a boom in housebuilding.

The Markit/CIPS construction PMI, which measures building activity, edged lower to 60 in May from 60.8, mainly reflecting slowing growth in commercial space such as offices, shops and warehouses.

However, it was still well above the 50 mark which separates expansion from contraction, and was only just below economists’ expectations of no change from 60.8. Housebuilding continued to grew at the fastest rate in the industry, albeit at a slightly slower pace than April.

Rob Wood, chief UK economist at Berenberg, said: “Construction is still booming despite the PMI slipping back a little in May. Construction had a bad recession as the government slashed investment projects and the housing market crashed. But the economic recovery is driving a sharp upturn. Low interest rates, rising confidence and surging house prices are combining in a sweet spot for the sector.”

Wood said that with underlying momentum meant that building work should bounce back after the flooding earlier in the year, helping to drive an accelerated rate of growth in the overall economy in the second quarter, up from 0.8% in the first quarter.

In a sign of rising momentum among builders, employment in the sector rose for the twelfth month in a row and at a slightly faster pace than April. But there were also indications that the industry is failing to keep up with demand, as the availability of subcontractors fell at the sharpest pace in almost 17 years.

Tim Moore, senior economist at Markit, said: “Output growth hit a seven-month low in May, but the UK construction sector is enjoying its strongest overall phase of expansion since the summer of 2007. Residential building remains a key engine of growth, with survey respondents citing another surge in new house building starts during May.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza