U.K. Homebuilding Surge Limits Decline in Construction Output

U.K. construction output declined in August as a drop in infrastructure, public work and maintenance offset a surge in homebuilding to its highest level for at least three years.

Construction, which accounts for 6.3 percent of the economy, slipped 0.1 percent from July, when it rose a revised 2.8 percent, the Office for National Statistics said in London. New private house building increased 1.6 percent on the month and 18.1 percent from a year earlier, the biggest annual increase since June 2011.

Construction is being boosted by demand for homes after a government program allowing purchases with minimal deposits got under way in April. An index of building activity stayed close to its highest level since at least 2008 in September, according to Markit Economics.

The pickup may ease concerns that Help to Buy is fueling a bubble in the property market as the pace of building struggles to keep up with demand. In the second quarter, the latest period for which a regional breakdown is available, homebuilding was “overwhelmingly driven” by London, where new private housing orders more than tripled, according to the statistics office.

In the three months through August, construction increased 2.4 percent compared with the previous quarter, suggesting the industry contributed to gross domestic product growth in the third quarter. Private homebuilding, which accounts for almost 16 percent of total construction, surged 8.4 percent in that period and was up 15.3 percent from a year earlier.

In August, construction rose 4 percent compared with the same month in 2012, the biggest increase since December 2011. Today’s report also showed that on a non-seasonally adjusted basis, construction output rose 0.6 percent in August from July and was up 3.5 percent compared with a year earlier.

Construction grew 1.9 percent in the second quarter and added 0.1 percentage point to GDP. The economy expanded 0.7 percent in the period. The ONS is scheduled to publish its first estimate of third-quarter GDP on Oct. 25.

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