LONDON (Reuters) - British construction activity jumped sharply in July to hit its highest level in over three years, led by a surge in residential building, a survey of purchasing managers showed on Friday.
The Markit/CIPS construction PMI leapt to 57.0 last month, up from 51.0 in June and its strongest level since June 2010.
The figure was way above the highest forecast in a Reuters poll of economists.
Residential construction, which has been the target of government incentives to boost Britain’s economic recovery, drove overall growth. Commercial construction and civil engineering also grew having shrunk earlier this year.
New orders rose at their quickest pace since April 2012, suggesting more growth ahead, Markit said.
“July’s survey highlights a new wave of optimism across the UK construction sector, with companies reporting a pace of expansion in excess of anything seen over the past three years,” said Tim Moore, senior economist at Markit.
David Noble, chief executive at the Chartered Institute of Purchasing & Supply, said suppliers were struggling to keep up with demand after being surprised by the speed of the turnaround.
Construction was the biggest drag on Britain’s gross domestic product between January and March but returned to growth in the second quarter.
Economists have warned that without growth in construction, the stimulus measures for housing could only end up pushing property prices higher.
Earlier on Friday, mortgage lender Nationwide said British house prices grew at their fastest annual rate for nearly three years last month and it cited slow building activity earlier this year.
On Thursday, a Markit/CIPS survey showed Britain’s manufacturing sector grew at its fastest pace in well over two years in July.
Writing by William Schomberg; editing by Ron Askew