Construction data boosts UK economy

The nation's builders saw new orders rise at the fastest rate in four-and-a-half years last month, a survey said today, further boosting hopes that the UK has dodged another recession.

The closely watched Markit/CIPS purchasing managers' index survey for overall construction output, in which a reading above 50 represents expansion, rose to 56.7 in March from 54.3 in February, the sharpest expansion in 21 months.

A general improvement in market activity boosted tenders and saw long-running negotiations closed as new orders rose at their fastest rate since September 2007, Markit said. Growth was seen across all construction areas - civil, commercial and housing.

The upbeat survey comes after the equivalent reading for the manufacturing sector hit a 10-month high in March, adding to expectations that the economy returned to growth in the first quarter of 2012, after shrinking 0.3% in the final three months of last year.

The commercial sub-sector, which covers shop and office space, was the strongest performing, although civil engineering activity, such as London's Crossrail project, strengthened at its fastest rate in a year.

A slight increase in residential construction was recorded, Markit added.

The data also showed a modest pace of job creation and an increased use of contractors, reflective of the growth of both output and new orders, Markit said.

Input prices faced by UK construction companies rose sharply in March, in line with the increases faced by manufacturers, as revealed in yesterday's survey.

High hopes for new marketing initiatives, a more buoyant outlook among clients and new tender opportunities meant that business confidence for the next year hit a near two-year high.

Chris Williamson, Markit chief economist, said the survey will "raise hopes that the country has avoided a slide back into recession".

But he added: "Looking ahead, the lack of big new projects such as Crossrail and the Olympics means expectations about the year ahead continued to run well below the pre-crisis peaks."

The construction and manufacturing surveys come after the Organisation for Economic Co-operation and Development (OECD) said the UK economy shrank in the first three months of the year, meaning it is officially in recession.

However, the OECD forecast contradicted many economists' predictions, after previous PMI surveys showed modest growth in the manufacturing industry and powerhouse services sector in January and February.

Blerina Uruci, economist at Barclays Capital, said: "Overall, today's PMI survey provides something to cheer about regarding the performance of the UK economy in the first quarter of this year."

PA