Growth continues in the British construction sector, although at a weak rate, according to data released on Wednesday.
The Purchasing Managers' Index (PMI) survey for April surprised on the upside, with the headline activity PMI posting its best reading so far in 2017, jumping by almost 1 point to 53.1 (above 50 indicates growth) over the March figure. This is the second-highest level for 13 months and exceeded market expectations, as consensus view is expecting 52.
While commercial building activity remained subdued, the survey reported renewed momentum in housing activity, and civil engineering output reportedly rose at the firmest pace since March 2016. There was also a solid increase in new orders at the start of the second quarter, so firms continued to recruit new staff in the sector, with growth in employment being the strongest for nearly a year.
However, input prices remained close to the more-than-five-year high hit at the start of the year.
Commenting on the figures, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, a London-based financial data company, said this year could be tough for the construction sector.
"Commercial work likely will remain depressed by Brexit uncertainty, and labor shortages across the entire construction sector may become more acute as immigration from the EU declines. On balance, then, 2017 still looks set to be another tough year for the construction sector," said Tombs.
However, there are some positive notes to be taken from the data. Looking ahead, said Tombs, the recovery in civil engineering work will likely strengthen, given plans for a 6.7-percent increase in public sector investment this fiscal year (to April 2018). But Tombs said the outlook for house building is mixed.
"It will be supported by further falls in mortgage rates, the continuation of the 'Help to Buy' equity loan scheme, and a dearth of existing homes being put up for sale, but undermined by the squeeze on real wages," he said.
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