Housebuilding saw growth in May for the first time since Liz Truss’s mini-budget, contributing to a surge in activity across the construction industry, as indicated by a closely watched survey.
The S&P Global purchasing managers’ index rose sharply to 54.7 in May, up from 53 in the previous month. This surpassed expectations in the City and marked the third consecutive month that the PMI exceeded the 50-point threshold, signifying growth. The housebuilding sector, in particular, showed improvement, with its reading climbing to 50.4 in May from 47.6, marking the first increase since October 2022.
Andrew Harker, economics director at S&P Global Market Intelligence, commented that construction was gaining momentum, highlighting expansions in commercial property and civil engineering activities in May. All three construction sub-sectors monitored by S&P Global surpassed the 50-point mark for the first time since May 2022.
The uptick in housing supply suggests that developers are feeling confident to initiate new projects, with buyers returning to the market after pausing due to a surge in mortgage rates following Truss and Kwasi Kwarteng’s mini-budget, which announced £45 billion of unfunded tax cuts. According to Nationwide data, house prices rose by 0.4 percent in May to £264,249. Mortgage approvals remained stagnant at about 61,000, although they had increased over the past year, they still fell below the long-term average.
The rise in construction output provides further evidence of steady economic growth after slipping into recession at the end of last year. Private sector output, as indicated by the composite PMI, grew more rapidly in May than early estimates had suggested.
