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British construction activity beat expectations in April, growing at its fastest pace in more than a year, according to a closely watched survey, as an improving economic outlook boosted the commercial and civil engineering sectors.
The S&P Global UK Construction Purchasing Managers’ Index rose to 53 in April, up from 50.2 in March and the highest since February 2023, data released on Tuesday showed.
The reading beat economists polled by Reuters forecast of 50.2 and was above the 50 mark, indicating rising production.
Tim Moore, economic director at S&P Global Market Intelligence, said demand in the construction sector had been boosted “by greater confidence in the UK’s broader economic outlook” and hopes of interest rate cuts in the second half of the year.
The figures come ahead of official data this week, which is expected to show the UK economy recovering after entering a technical recession in the second half of 2023.
Economists polled by Reuters expect GDP data released on Friday to show output rose 0.4 percent in the first quarter of 2024 compared to the previous three months.
Meanwhile, markets are pricing in a rate cut by the Bank of England later this year. However, the Monetary Policy Committee is expected to keep interest rates at 5.25 percent at its meeting on Thursday.
Commercial activity outperformed other parts of the construction sector in April, with civil engineering making a solid contribution to overall growth, while the residential construction sector continued to slow.
The PMI survey found that commercial construction activity reported its first reading above 50 since August 2023, indicating expansion. It was the fastest growing area of the construction sector in April, with an index of 53.9, up from 49.9 the previous month.
Builders surveyed said they had seen an increase in workloads and a turnaround in customer demand, driven in part by renovation projects.
Civil engineering activity continued to increase in April, recording its strongest pace in nine months, with an index of 53.6, up from 50.4 the previous month.
But homebuilding activity took a hit, recording its lowest level since January, as builders noted sluggish market conditions and the impact of increased borrowing costs.
The reading “suggests that year-to-date increases in mortgage rates are weighing on demand for new homes,” said Matthew Pointon, senior real estate economist at Capital Economics.
Separate data released by lender Halifax on Tuesday showed house prices remained flat in April after falling in March, reflecting volatility in the mortgage market.
Optimism about the business outlook for the coming year across the construction sector increased slightly in April, with almost half of the PMI survey panel expecting output to rise over the next 12 months.