House building boosts construction

Construction returned to growth in October as a rise in house building helped the sector expand by 2.2%, reaching a near two-year high level of output.

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House building helped the construction sector expand by 2.2% in October, figures show

Construction returned to growth in October as a rise in house building helped the sector expand by 2.2%, reaching a near two-year high level of output.

Official figures also showed the sector had performed better than thought earlier in the year, with revisions large enough to add 0.1% to overall gross domestic product (GDP) growth in each of the first and third quarters.

Meanwhile a slump in September was not as bad as had been feared - construction shrank by 0.5% rather than 0.9%.

The latest data from the Office for National Statistics (ONS) showed output for the sector in October reached £9.8 billion, the highest level since December 2011.

New housing work increased by 5.8%, with the market bolstered by Government initiatives such as Help to Buy.

Infrastructure was up 7.5% but other public work fell 5.7% and private industrial work showed a disappointing drop of 5.8%, although new orders for planned projects in this sphere showed promise, up 31.8%.

Data revisions to the construction sector's performance earlier during 2013 would be large enough, on their own, to increase overall GDP growth for the first quarter from 0.4% to 0.5% and for the third quarter from 0.8% to 0.9%.

However, new quarterly GDP estimates to be published next week must also take account of any revisions, upward or downward, in other parts of the economy.

Chris Williamson, chief economist at Markit, said: "The UK construction industry is enjoying a strong and increasingly broad-based recovery, according to the Office for National Statistics, meaning the sector should help boost the economy in the fourth quarter."

Howard Archer, of IHS Global Insight, said: "The improvement in construction activity is being led by house building, which is obviously a reflection of the much-improved housing market.

"Increased house building is particularly welcome news given that a shortage of properties is a major factor repeatedly putting upward pressure on UK house prices.

"Nevertheless, the fact remains that there needs to be extended, very strong house building to make significant inroads into the problem."

Prime Minister David Cameron's official spokesman told a regular Westminster media briefing: "In terms of the construction statistics that are out today, I do think it is evidence of the economic plan working and the importance of sticking to it.

"The latest statistics show new housing construction up almost 19% on a year ago and as part of this new public housing orders are at their highest level for 20 years."