Activity in the construction sector rebounded in May to its highest level for nearly 18 months, according to figures that provide relief after a series of weaker business surveys.
The construction purchasing managers’ index rose to 56 in May from 53.1 in April, indicating healthy growth in activity, according to IHS Markit, providers of the data. Its post-crisis peak in 2014 was 64.6.
The PMI surveys do not measure economic output from the construction sector directly but have in the past provided a reasonably accurate forecast of the official data.
In recent months though, they have painted a more optimistic picture than final output figures. The figure of 50, which IHS Markit says marks the difference between expansion and contraction, has not tallied with recession and growth in the past.
Samuel Tombs of Pantheon Macroeconomics said a figure above 53 was generally needed for the subsequent official data to indicate the sector was growing.
“While housebuilding should remain supported by low mortgage rates and the Help to Buy equity loan scheme, we continue to fear that commercial construction work will tail off again as the point of the UK’s EU exit in 2019 draws nearer,” Mr Tombs said.
IHS Markit was more optimistic. It said the rebound stemmed from rapid growth of housebuilding activity. It found “the fastest upturn in residential work since the end of 2015”.
Respondents to the survey noted a strong pipeline of projects and resilient demand for homes despite a significant slowing in house price inflation.
Employment in the sector, which is a heavy user of EU migrants, was rising strongly, it added, although companies faced rising prices for materials.
Tim Moore of IHS Markit said: “The forward-looking elements of the latest survey are reassuring for the construction sector, notably the acceleration in new business growth to its strongest so far this year.”
The official data for the construction sector have been stripped of “national statistics” status due to concerns over reliability. They show output in the construction sector falling for three consecutive months in January, February and March, following a strong end to 2016.
Although the headline measures have differed from the PMI data, the Office for National Statistics agrees that public and private housebuilding has been the strongest part of the construction sector over the past year.
But while the ONS also thinks private commercial construction output has grown significantly over the past year, the PMI data suggest this sub-sector was “trapped in the slow lane”.