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UK construction activity beat expectations in April, growing at its fastest pace for more than a year as a brighter economic outlook boosted commercial and civil engineering sectors, according to a closely watched survey.
The S&P Global UK Construction Purchasing Managers’ Index rose to 53 in April, up from 50.2 in March and the highest reading since February 2023, data released on Tuesday showed.
The figure surpassed the 50.2 forecast by economists polled by Reuters and stood above the 50 mark, which indicates rising output.
Tim Moore, economics director at S&P Global Market Intelligence, said demand in the construction sector “was boosted by greater confidence regarding the broader UK economic outlook” and hopes of interest rate cuts in the second half of the year.
The figures come ahead of official data this week that is expected to show the UK economy is bouncing back after entering a technical recession in the second half of 2023.
Economists polled by Reuters expect GDP data released on Friday to show that output in the first quarter of 2024 increased by 0.4 per cent compared with the previous three months.
Meanwhile, markets are pricing in an interest rate cut by the Bank of England later this year. But the Monetary Policy Committee is expected to hold interest rates at 5.25 per cent when it meets on Thursday.
Commercial activity outperformed other areas of the construction sector in April, with civil engineering providing a solid contribution to overall growth as the residential building sector continued to slow.
The PMI survey showed that commercial building activity reported the first reading above 50, indicating expansion, since August 2023. It was the fastest-growing area of the construction sector in April with an index of 53.9, up from 49.9 in the previous month.
Surveyed builders said they had seen workloads rise and a turnaround in customer demand, in part driven by refurbishment projects.
Civil engineering activity further expanded in April and at the strongest pace for nine months, with an index of 53.6, up from 50.4 in the previous month.
But housebuilding activity registered a setback with the lowest reading since January, as construction companies noted sluggish market conditions and the impact of elevated borrowing costs.
The reading “suggests that the tick up in mortgage rates since the start of the year is weighing on demand for new homes”, said Matthew Pointon, senior property economist at Capital Economics.
Separate data published by the lender Halifax on Tuesday showed that house prices stagnated in April after contracting in March, reflecting volatility in the mortgage market.
Optimism for the year-ahead business outlook across the construction sector edged up in April, with nearly half of the PMI survey panel anticipating a rise in output during the next 12 months.
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