UK Construction Grew Fastest in Eight Months in February

March 3, 2011 - 0:0

UK construction expanded at the fastest pace in eight months in February, signaling the industry has rebounded after cold weather dented the recovery in the fourth quarter.

A gauge of building activity based on a survey of purchasing managers rose to 56.5 from 53.7 the previous month, Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply said on Wednesday in an e-mailed report in London. The median forecast of 10 economists in a Bloomberg News survey was for a reading of 52.8. A measure above 50 indicates expansion.
“A weather-beaten UK construction sector is showing signs of repair,” CIPS Chief Executive Officer David Noble said in the report. “The situation is still fragile, however, considering the likely impact of government cuts.”
Bank of England Governor Mervyn King said on Tuesday the recovery will be “choppy” as the government’s fiscal squeeze takes hold. While a report on Tuesday showed the housing market strengthened in February, the European Commission cut its forecast for 2011 UK growth to reflect government cuts.
Residential construction showed a “marked” increase in February from January, while civil engineering expanded the fastest in three years, CIPS said. Commercial construction grew for a 12th month.
The pound rose against the dollar after the report was published and was up 0.1 percent to $1.6284 as of 9:41 a.m.
Persimmon Plc, the UK’s third-largest homebuilder by volume, said on Tuesday 2010 profit rose 56 percent as the company sold more homes at higher prices. CEO Mike Farley said while the market remains “difficult,” he is “encouraged” by the performance in the first eight weeks of 2011.
House prices rose 0.3 percent in February from the previous month, though are down 0.1 percent from a year earlier, Nationwide Building Society said on Tuesday. Central bank data showed mortgage approvals rose in January to 45,723 from a 22- month low in December.
The European Commission on Tuesday lowered its growth forecast to 2 percent from 2.2 percent in November. The economy contracted 0.6 percent in the fourth quarter during the coldest December in a century.
The construction report showed that input costs rose in February at the fastest pace since August 2008 as raw material prices increased. Bank of England officials split four ways in February on policy after consumer-price inflation quickened to 4 percent in January, double their target.
Policy makers held the benchmark interest rate at a record low of 0.5 percent and their bond-purchase plan at 200 billion pounds ($325 billion) on Feb. 10. Andrew Sentance voted for a 50 basis-point rate increase in the key rate, while Chief Economist Spencer Dale and Martin Weale argued for a quarter-point rise. Adam Posen maintained a push for more bond purchases.
(Source: Bloomberg)