UK Construction Sector Maintains Steady Growth - Markit

Construction sector activity in the UK has continued its steady growth in April, according to a private industry survey, despite official statistics reporting a big drop in output.

Employment rose, input cost inflation hit its lowest rate for over two years, and there was strong growth in new business, reports the Markit/CIPS Construction PMI survey.

"April saw another generally buoyant UK Construction PMI survey, with rates of output and new order growth close to March's recent highs," Tim Moore, senior economist at Markit, said.

"Improved inflows of new work have also helped raise business expectations in the sector from the three-year low seen last Autumn."

The construction PMI figure was 55.8 in April, down from 56.7 in March. However this is still well above the neutral 50 figure. An advanced poll of economists taken by Reuters indicated a reading of 54.

Sterling rose to a 22-month high against the Euro following the report as foreign exchange traders matched the UK data against a grim reading of manufacturing activity in the eurozone. The single currency now buys 81.215 pence on fx markets, the lowest since June 2010. Sterling rose to $1.6225 against the US dollar.

A significant drop in UK construction sector activity is the reason for worse-than-expected GDP figures in the first quarter of 2012, according to the Office for National Statistics (ONS).

The ONS preliminary estimate showed a 0.2 percent contraction of the UK economy following on from a 0.3 percent contraction in the final quarter of 2011, meaning the country is in recession.

Construction sector output dropped by 3 percent, reported the ONS, at odds with the recent PMI data.

In March Markit's Construction PMI figure jumped to 56.7 from February's 54.3 - the sharpest rise in 21 months.

Good weather had led to a surge in demand for construction projects, particularly in the commercial, housing, and civil-engineering sub-sectors.

Mortgage approvals rise unexpectedly

In another piece of good news for the UK economy mortgage approvals hit 49,860 in March, according to the Bank of England.

This is up from February's 49,029 figure and defied forecasts of a dip to 48,000.

A stamp duty holiday for first time buyers ended in late March, which may explain a late surge in home loans.

UK manufacturing slowed in April

Other PMI data for the manufacturing sector showed activity had slowed in April, with new export orders suffering their steepest decline in three years.

A struggling Europe, the UK's biggest trading partner, and weak global demand hindered UK manufacturing exports, though there was slight overall growth in the sector.

The index figure for manufacturing dropped to 50.5 in April, down from 51.9 the previous month.

"Even at this lower level, the PMI suggests that manufacturing output could make a small positive contribution to GDP growth in Q2," said a research note from French bank Societe Generale.