Britain’s housebuilding recovery spurred the first rise in construction output for seven months in May, raising hopes the sector’s slump may be easing.
The fastest increase in housebuilding work for more than two years lifted the closely-watched Markit/CIPS construction purchasing managers’ index (PMI) to a reading of 50.8 last month above the 50 level which separates growth from contraction.
It was the first positive construction PMI since October and followed a 49.4 reading in April, defying economists who had expected only a slight improvement.
However, the survey pointed to another fall in commercial building and civil engineering, where spending is drying up.
Tim Moore, senior economist at Markit, said construction appears to have “finally pulled out of a tailspin”, but the sector is “worryingly reliant on residential building work”.
Housebuilders have been reporting surging interest as Chancellor George Osborne’s new Help to Buy package of loans and guarantees sends would-be buyers flocking to new developments.
Under Help to Buy, the Government lends buyers up to 20% of the value of a new-build home, interest-free for five years.
Mortgage guarantees also aim to support another £130 billion of high loan-to-value mortgages by shifting the risk of default away from lenders on to the state.
However, experts have warned Help to Buy may drive up house prices and outgoing Bank of England governor Sir Mervyn King has said it must be a temporary measure.
The report showed companies citing stronger demand in the housebuilding sector, which saw “robust and accelerated” expansion.
Firms saw the first improvement in new business volumes for 12 months, while optimism also surged. Around 40% of firms believe output will rise over the next year, compared with just 13% who expect a fall.
Despite this, staffing levels were flat.
Suppliers also gave their worst performance for almost six years, as lead times lengthened on low stocks and capacity shortages.