Bloomberg News

U.K. Construction Growth Accelerates to Fastest in 21 Months

April 03, 2012

U.K. construction expanded at the fastest pace in 21 months in March, adding to signs the economy returned to growth in the first quarter.

A gauge of building activity rose to 56.7 from 54.3 in February, Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply said in a report today in London. The median forecast in a Bloomberg News survey of nine economists was 53.4. A reading above 50 indicates expansion. Markit said confidence at companies increased to a 22-month high.

The construction report follows a survey yesterday showing manufacturing grew at the fastest pace in 10 months in March. The British Chambers of Commerce said today Britain has probably avoided a second recession, though the government needs to do more to stoke a “weak” recovery.

“The good weather appears to have led to a surge in demand for construction projects in March, adding to the recent flow of good news which suggests the economy will have skirted a recession,” said Chris Williamson, chief economist at Markit. “The particularly encouraging news is that the improvement in confidence is generating more jobs.”

The report showed that all three construction categories -- housing, commercial and civil engineering -- registered growth in March. Employment increased, which Markit said reflected growth in new orders and output at companies.

Newcastle, England-based Bellway Plc (BWY), the U.K.’s fourth- largest homebuilder by volume, said March 27 first-half profit rose as it sold properties at higher average prices. It also said that while there are “uncertainties in the wider economy,” there remains “an underlying demand for our homes.”

Rising Prices

Britain’s economy contracted 0.3 percent in the fourth quarter as the European debt turmoil constrained services from airlines to banks. The BCC said the economy probably expanded 0.3 percent in the first quarter.

Markit said input prices faced by U.K. construction companies rose “sharply” in March, driven by higher costs for raw materials such as oil. “Nonetheless, the latest increase was below the long-run trend,” it said.

The Bank of England expanded its bond-purchase program by 50 billion pounds ($80 billion) in February to 325 billion pounds to support the economic recovery. Officials will start a two-day policy meeting tomorrow, and will probably maintain the target for purchases at that level while holding their benchmark interest rate at 0.5 percent. The bank will announce the decision at noon in London on April 5.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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