Britain’s construction firms enjoyed a sharp pickup in activity last month as sunny weather and growing confidence among clients sent demand for new
jobs soaring and bolstered hopes the wider UK economy can avoid recession.
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Following on from unexpectedly upbeat news from the larger manufacturing survey on Monday, a closely watched construction survey put activity at a 21-month high for March. It provided further evidence of a slow recovery in one of the sectors that helped push Britain’s economy into negative territory at the end of last year.
The report chimes with other business surveys, suggesting that after the UK economy shrank at the end of last year, activity and confidence have slowly picked up in recent months. A separate report from the British Chambers of Commerce this morning pointed to “a welcome but modest improvement in the economic situation”.
Commenting on the latest crop of indicators, David Tinsley, UK economist at BNP Paribas, said: “That all suggests that the economy did indeed post moderate growth in the first quarter, as we have been saying, and things looks pretty good for the second quarter as well. After a wobble over the last few weeks the data-flow out of the UK appears to be finding its feet again.”
The headline reading on the Markit/CIPS UK construction PMI poll came in at 56.7, up from 54.3 in February. That is well above the 50-mark dividing growth from contraction and higher than the 53.5 forecast by economists in a Reuters poll.
Within the survey, new orders expanded at fastest rate in four-and-a-half years and confidence among construction companies continued to improve. Commercial construction was the strongest performing of the sub-sectors.
Chris Williamson, chief economist at Markit, said: “The good weather appears to have led to a surge in demand for construction projects in March, adding to the recent flow of good news which suggests the economy will have skirted a recession.
“This bodes well for the sector’s contribution to overall growth of the economy in the first quarter and will raise hopes that the country has avoided a slide back into recession.”
The survey is at odds with last week’s assertion that the UK is heading back into recession – technically two consecutive quarters of contraction – and will be among the slowest of the world’s largest economies to recover in the first half of this year, according the Paris-based thinktank, the Organisation for Economic Co-operation and Development (OECD).
Still, economists in the UK also warn that despite the last few months of more upbeat indicators, the economy is not out of the woods yet. They cite pressures from high oil prices, the government’s austerity drive and the ongoing crisis in the eurozone. Bank of England governor Mervyn King has predicted the UK could even suffer another dip in GDP in coming months as the extra bank holiday for the Queen’s jubilee knocks output.
All eyes will now be on Wednesday’s services PMI report. Economists expect the UK’s dominant sector, which covers banks to hairdressers, enjoyed further growth last month but at a slightly slower pace.