New demand for housing kept the construction industry growing in December, adding to evidence that the sector rebounded out of recession in the final quarter of 2017.
The positive figures should help the wider economy by removing a drag on GDP growth.
But the commercial property market is still in the doldrums - activity in the sector has fallen in each of the past six months.
Overall the construction sector grew at a modest pace last month, with IHS Markit’s purchasing managers’ index coming in at 52.2 in December, down from 53.1 in November.
Any score above 50 indicates growth.
Residential property construction led the way with a PMI of 55.3, down a touch on the 56.6 recorded in November.
Civil engineering activity held flat at 50.1, an improvement on three prior months of contraction.
And the commercial construction sector fell further to 47.2, down from 48.4 in November.
“Continued support from the Help to Buy Scheme and other housing policy initiatives should keep housebuilding motoring along in 2018,” said Samuel Tombs at Pantheon Macroeconomics.
“In addition, commercial work might stabilise if, as we expect, a Brexit transition deal is agreed this year. But for now, the UK Government still insists that Britain eventually will leave the EU’s single market and customs union, so many firms that depend on overseas customers likely will remain reluctant to commit to large investments.”
There are some indications that the sector’s position may improve in the months ahead - the index for new orders rose to 53.1, the highest level since May, while the business expectations component stands at 63.3.
Builders are taking on more workers to meet this demand with the employment component of the PMI rising to 53.1.
Construction firms also ramped up their own demand, bringing in new supplies to match the growth, pushing the quantity of purchases section of the index up to 54.2, a two-year high.
The rise in orders “offers some hope” for the sector, said Howard Archer, chief economic adviser to the EY Item Club.
But overall the sector is still relatively weak.
“Despite showing modest expansion in December, the PMI indicates that the construction sector found life very challenging in the fourth quarter of 2017,” Mr Archer said.
Inflation remains a threat with the index for input prices edging up to 67.5, a modest acceleration on the month.
Residential property construction led the way with a PMI of 55.3, down a touch on the 56.6 recorded in November.
Civil engineering activity held flat at 50.1, an improvement on three prior months of contraction.
And the commercial construction sector fell further to 47.2, down from 48.4 in November.
“Continued support from the Help to Buy Scheme and other housing policy initiatives should keep housebuilding motoring along in 2018,” said Samuel Tombs at Pantheon Macroeconomics.
“In addition, commercial work might stabilise if, as we expect, a Brexit transition deal is agreed this year. But for now, the UK Government still insists that Britain eventually will leave the EU’s single market and customs union, so many firms that depend on overseas customers likely will remain reluctant to commit to large investments.”
There are some indications that the sector’s position may improve in the months ahead - the index for new orders rose to 53.1, the highest level since May, while the business expectations component stands at 63.3.
Builders are taking on more workers to meet this demand with the employment component of the PMI rising to 53.1.
Construction firms also ramped up their own demand, bringing in new supplies to match the growth, pushing the quantity of purchases section of the index up to 54.2, a two-year high.
The rise in orders “offers some hope” for the sector, said Howard Archer, chief economic adviser to the EY Item Club.
But overall the sector is still relatively weak.
“Despite showing modest expansion in December, the PMI indicates that the construction sector found life very challenging in the fourth quarter of 2017,” Mr Archer said.
Inflation remains a threat with the index for input prices edging up to 67.5, a modest acceleration on the month.
