Construction activity grows

Published:  04 March, 2011

LONDON: Construction activity grew at its fastest pace in 8 months in February, bouncing back after it was one of the key factors in a surprise economic downturn at the end of last year.

The headline activity index in the Markit/CIPS survey of purchasing managers jumped almost three full points to 56.5 in February, confounding expectations for a slight fall and driving the pound to a session high against the dollar.

"The construction sector is on course for reasonable growth in the first quarter of 2011 after contracting markedly in the fourth quarter of 2010," said Howard Archer, UK economist at IHS Global Insight.

Construction firms continued to shed jobs, but at their slowest pace in 8 months and the survey said some companies had reported they were taking on staff to cope with higher workloads. However, input costs rose at their fastest rate since August 2008, driven by oil, fuel and steel.

"The further improvement in construction activity and evidence of rising price pressures in the sector marginally increases the case for the BoE to raise interest rates sooner rather than later as it modestly boosts growth prospects for the early months of 2011," Mr Archer said.

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