UK construction sector unexpectedly picks up in April

Growth in the UK construction sector unexpectedly picked up in April, according to data released on Wednesday.

The Markit/CIPS UK construction purchasing managers' index rose to 53.1 from 52.2 in March, signalling the fastest rate of expansion so far this year. Economists had been expecting the index to tick down to 52.0.

A reading above 50 indicates expansion while a reading below signals contraction.

Civil engineering was the best-performing sub-category, with the fastest rate of expansion since March last year, while residential building growth hit a four-month high, but commercial building work increased at a weaker pace than last March.

Tim Moore, senior economist at IHS Markit, said: "April’s survey reveals a positive start to the second quarter of 2017, with a robust upturn in civil engineering activity helping to boost the construction industry. There were also more encouraging signs from the house building sector, as growth recovered to its strongest so far this year. However, the performance of the commercial building sector remained subdued in the context of the past four years.

“UK construction companies noted that the resilient economic backdrop helped to drive up client spending in April. Greater workloads led to the fastest pace of job creation since May 2016 and a continued squeeze on sub-contractor availability."

Pantheon Macroeconomics said growth in construction activity remains "extremely weak", despite the small rise in the construction PMI in April.

"Although any PMI reading above 50.0 in theory signals expansion, it has had to exceed 53.0 in practice to be consistent with growth," it said.

"Looking ahead, the recovery in civil engineering work likely will strengthen, given plans for a 6.7% increase in public sector investment this fiscal year. But the outlook for housebuilding 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. Meanwhile, commercial work likely will remain depressed by Brexit uncertainty, and labour 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.

Howard Archer, chief UK and European economist at IHS Markit, pointed out that construction activity remains well below its peak levels, adding that "there was nothing like the pick-up in activity in April that was evident in the purchasing manager’ survey for the manufacturing sector (which showed activity spiking to a three-year high)".

On Tuesday, April's manufacturing purchasing managers' index from IHS Markit and CIPS unexpectedly leapt to a three-year high of 57.3 having dipped to 54.2 in March, with most economists forecasting another modest fall.

This was the manufacturing sector's ninth month of expansion in a row since the decline in the post-referendum month of July.