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House building and civil engineering boost construction output

Construction output rebounded in April, rising at its fastest rate so far this year amid a jump in house building and civil engineering activity.

The closely watched Markit/CIPS UK Construction purchasing managers' index (PMI) rose to 53.1 in April, up from 52.2 in March and above economists' expectations of 52.0.

A reading above 50 indicates growth.

The rise was credited to an increase in civil engineering and residential building activity, while data showed a "solid upturn" in new work received by UK construction companies

Duncan Brock, director of customer relations at the Chartered Institute of Procurement & Supply (CIPS) said: "With the biggest rise in new orders since the beginning of the year, the sector is in a strong pre-election position buoyed up by a hardy UK economy and strong client confidence.

"The housing sector offered up the best news, recovering from last month's minor blip and building on its strongest performance since the end of last year."

It comes as separate PMI figures on Tuesday showed that manufacturing output jumped to a three-year high in April as new orders were boosted by strong demand at home and abroad.

The pound was barely moved by the data and was trading down nearly 0.1% against the US dollar at 1.292 and was hovering near the flatline against the euro at 1.183.

The construction PMI survey showed that civil engineering was the best performing sub-category in the construction sector last month, expanding at the fastest rate in over a year.

Home building growth reached a four-month high, while commercial building expanded at a weaker pace than in March.

The jump in new work for the construction sector underpinned a rise in construction sector employment which rose at the fastest pace since May 2016.

However, demand for workers sparked concerns about the availability of subcontractors and the size of the wider skilled labour pool.

New work also increased demand for construction materials, with input purchases rising at a rate not seen since November.

But that demand fuelled another "steep" rise in input prices, which have already climbed after the Brexit vote due to the weaker pound - a factor that has made imports more expensive.

Tim Moore, senior economist at IHS Markit, said: "Supply chain pressures also intensified, as highlighted by the largest lengthening of delivery times for almost two years.

"A sharp rate of input cost inflation persisted in April, reflecting an ongoing pass through of higher commodity prices, imported goods and energy costs.

"However, the recent recovery in sterling may have started to help limit some cost pressures in April, as the overall rate of input price inflation moderated to a six-month low."

The survey showed that around 49% of respondents are expecting a jump in construction output over the next year, while only 10% are forecasting a drop.

That level of confidence is slightly lower than March, but is "still well above" the post-Brexit vote low in July 2016.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the recovery in civil engineering is likely to strengthen given the 6.7% increase in public sector investments earmarked for the fiscal year.

"But the outlook for housebuilding is mixed; it will be supported by further falls in mortgage rates, the continuation of the Help to Buy equity loan scheme and a dearth of existing homes being put up for sale, but undermined by the squeeze on real wages," Mr Tombs said.

"Meanwhile, commercial work likely will remain depressed by Brexit uncertainty, and labour shortages across the entire construction sector may become more acute as immigration from the EU declines.

"On balance then, 2017 still looks set to be another tough year for the construction sector."

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