Construction jumps: House building booms despite price worries

A boom in housebuilding has sent the construction sector racing ahead, a rare economic fillip to Theresa May in the week before the general election.

Though most recent economic data have been gloomy — with inflation rising faster than pay, the housing market wobbling and the pound under pressure — yesterday there were strong figures from the manufacturing sector.

On Friday it emerged that the construction industry is surging at its fastest pace since 2015 as housing strengthened.

IHS Markit’s monthly index rose to 56 in May from 53.1 in April — any number above 50 indicates growth.

Last month’s jump defied the gloomy predictions of City economists who expected the index to fall below 53.

Duncan Brock at the Chartered Institute of Procurement & Supply said: “After years of sluggish housebuilding, the construction sector has snapped back into action in May. Construction growth has surged to a 17-month high as the uncertainty caused by the EU referendum appears to be abating.”

The surge is such that there are now fears that Britain will hit a shortage of builders — and bricks.

Brock added: “The rapid upturn in production is putting considerable pressure on construction supply chains. Suppliers are struggling to meet demand while there is a growing shortage of contractors to complete work. After the experience of the financial crisis, it may be some time before risk aversion fully recedes and suppliers have more confidence to invest in their capacity. Only time will tell whether we are witnessing a long-awaited resurgence in housebuilding.”

Nationwide said yesterday that house prices had fallen for a third straight month. That was the longest run of declines since 2009, after the banking crash. That led to jitters in some quarters as experts fretted that a housing crash could be on the cards, dealing a disastrous blow to the chances of the Prime Minister. That would also lead homebuilders to down tools.

Tim Moore, senior economist at IHS Markit, said: “A sustained rebound in residential building provides an encouraging sign that the recent soft patch for property values has not deterred new housing supply. Instead, strong labour market conditions, resilient demand and ultra-low mortgage rates appear to have helped to boost work on residential development projects in May.”

Those strong figures helped to buoy equities further: the FTSE 100 rose 29.32 points to 7573.09.

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