Market News

BY  Tom Rees, Bloomberg News

, Source: S&P Global

(Bloomberg) -- The UK economy’s rebound from recession appeared to be gathering momentum in March, with a key industry survey showing growth across all three main sectors for the first time in almost two years.

S&P Global’s construction purchasing managers’ index edged up to 50.2 in March from 49.7 the previous month, ending a six-month period of falling output. Readings above 50 signals growth, and the score was slightly stronger than the 49.9 expected. 

The report was the last of the major sectors covered by the PMI — services, manufacturing and construction — to show growth and marked the first time since June 2022 that they expanded together. 

It supports the idea that the UK bounced back from last year’s recession and was picking up at the end of the first quarter. Even so, it will take time for official data to register a firm upswing — and even then the expectation is for only a marginal pace of expansion not far above the stagnation. 

“Improving real wages and expected interest rate cuts are proving to be the right medicine to end the construction downturn, with all major sectors of the industry now showing flat or marginally rising output,” said Rob Wood, chief UK economist at Pantheon Macroeconomics. “Renewed falls in mortgage rates in the coming months should keep builders upbeat.”

A rapid recovery would give a boost to Prime Minister Rishi Sunak, who put the economy at the heart of his agenda ahead of an election likely later this year.

“The near-term outlook for construction workloads appears increasingly favorable as order books improved again in March and to the greatest extent for just under one year,” Tim Moore, economics director at S&P Global Market Intelligence, said in a report Friday. He said firms reported being “helped by easing borrowing costs and signs that UK economic conditions have started to recover in the first quarter.”

It followed an upgrade to the manufacturing PMI which edged the sector into expansion territory earlier this week and confirmation of continued firm growth in services, the UK’s largest sector.

S&P said a stabilization in housebuilding helped the wider construction sector after it was hit hard by the property market’s woes. Housebuilders enjoyed their best performance in the survey since November 2022 with civil engineering the strongest part of the sector.

(Updates to add chart.)