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UK construction PMI rises to 8-month high in Sept: Markit/CIPS

[LONDON] British construction activity grew at one of the fastest rates on record last month, though slower rises in new orders and employment raise questions about the durability of the upturn, a survey of purchasing managers showed on Thursday.

The Markit/CIPS construction PMI rose to 64.2 in September from 64.0 in August, beating economists' expectations for a slight fall and showing the strongest growth since the six-year high of 64.6 recorded in January.

The expansion in commercial work and civil engineering projects started to catch up with booming house-building.

The government is trying to encourage the construction of new homes to address a shortage of supply which has pushed prices up sharply over the past year. The Bank of England has described the housing market as the biggest domestic risk to the country's economic recovery.

Growth in new orders and employment slowed to a four-month low as builders faced sharply rising costs and bottlenecks in the supply of some materials, prompting the most cautious outlook from construction firms in more than a year.

"Housing activity remains the brightest spot in the construction sector, but its outperformance has started to fade. Moreover, residential construction continues to see the most intense pressures on supply chains and skilled labour availability," said Tim Moore, senior economist at Markit.

The strength in the construction sector contrasts with manufacturing, where a similar PMI survey on Wednesday showed growth falling to a 17-month low.

The PMI's strength is also yet to show up fully in official data, which covers a greater number of small firms and reported growth of 0.7 per cent in the three months to June, down from 1.8 per cent in the first three months of the year.

Construction makes up about 6 per cent of Britain's economy. - Reuters