August 4, 2014 / 8:34 AM / 5 years ago

UK house building grows at fastest rate since 2003 - PMI

LONDON (Reuters) - British house-building accelerated last month at the fastest rate since November 2003, leading to a record pace of job creation and a shortage of supplies, a survey showed on Monday.

A crane is silhouetted at a construction site in central London July 2, 2014. REUTERS/Luke MacGregor

The monthly Markit/CIPS purchasing managers’ index (PMI) for the wider construction sector, which also includes commercial building and civil engineering, fell to 62.4 in July from 62.6 in June - just above the Reuters poll forecast of 62.0.

Readings above 50 denote expansion.

House-building was the strongest performing category in the PMI as construction activity grew for the 15th successive month, with hiring accelerating at the fastest rate since at least April 1997 when the survey began.

Respondents attributed rising job numbers to increased workloads and efforts to boost capacity, as well as some concerns about sub-contractor availability, which fell for the 13th month running.

The Bank of England has said that a shortage of new homes is the underlying reason for Britain’s fast-rising house prices, which have increased by around 10 percent in the past year, and almost double that in London, according to some surveys.

Markit said there was strong demand for construction materials in July, placing additional pressure on suppliers and reflected by a sharp rise in vendors’ delivery times.

Respondents noted low stocks and capacity shortages at suppliers and average cost burdens increased in turn over the month, with growth in input prices easing only a little from June’s six-month high.

But higher levels of overall construction output were supported by further steep improvement in new business intakes. New orders increased each month since May 2013, which respondents linked in July to greater confidence among clients.

Civil engineering activity growth also speeded up, although commercial real estate development grew at a slower rate than last month, pulling the rate of growth in overall activity below the level seen in June.

The equivalent manufacturing survey last week pointed to slowing growth, driving sterling to a seven-week low against the dollar. Some investors saw that as weighing against an early rate hike by the Bank of England, whose policymakers meet on Thursday.

(This story has been refiled to make clear house-building is a component of the wider construction PMI)

Reporting by Tess Little, editing by Catherine Evans

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