Construction Sector Output Jumps as UK House Prices Rise

Construction sector output in the UK increased by an impressive 2.2% in July, according to official figures.

The Office for National Statistics (ONS) revealed that the hike was predominantly due to a rise in new work (3.2%) and a small gain (0.6%) in repair and maintenance jobs.

The research also found that the sector's output increased by 2% in the year, thanks to a 5.8% upturn in new assignments.

But the ONS estimated a 3.6% fall in repair and maintenance jobs during the same period.

New orders in the sector jumped by 19.8% in the second financial quarter from the previous three months, boosted by increasing demand from the private sector, infrastructure projects and commercial work.

New work also saw staggering annual growth of 32.8% in the sector thanks to a large rise in orders.

The positive data adds to reports that the economy and construction industry is now recovering from the financial crisis of 2008.

According to a monthly GDP estimate by the National Institute of Economic and Social Research (NIESR), the UK economy grew by 0.9% in the three months to the end of August, up from the second quarter's official reading of 0.7%. The third quarter ends in September.

Elsewhere, Markit's purchasing managers index (PMI) for construction hit 59.1 in August, up from July's 57 amid the fastest pace of output growth since September 2007. It was the fourth consecutive month of expansion.

Any reading above the neutral 50 mark signifies expansion of activity in the sector.

The index is compiled from surveys of construction industry purchasing managers.

"A new dawn is breaking in construction. The industry recorded the fastest pace of growth since 2007 in August, leaving the dark days of recession behind," said David Noble, chief executive at the Chartered Institute of Purchasing & Supply, which compiles the monthly UK PMI reports along with Markit.

The news comes as UK house prices rose at their fastest pace in close to seven years during August.

The Royal Institution of Chartered Surveyors (RICS) said its house price balance lifted to +40 in the month, up from July's +37 and the highest reading since November 2006.

The balance is between housing market professionals reporting rises and falls.