LONDON, July 2 A surge in home-building helped British construction activity to grow at its fastest annual pace in four months in June, bucking expectations for a slowdown, industry data showed on Wednesday.
The monthly Markit/CIPS purchasing managers' index (PMI) for the construction sector rose to 62.6 in June from 60.0 in May, its highest level since February and well above the forecast for a fall to 59.5.
Readings above 50 represent year-on-year growth in activity, and those below 50 point to contraction.
The equivalent manufacturing survey on Tuesday also beat expectations, driving sterling to its highest level in nearly six years and bolstering expectations that the Bank of England would raise interest rates this year.
The construction survey showed the fastest pace in hiring in the sector since 1997.
"(This) represents a remarkable yardstick of progress as the sector looks to recover the ground lost over the past seven years," said survey author Tim Moore.
Home-building was the fastest-growing sector, with the biggest pick-up in activity since January as rapidly rising house prices, low interest rates and strong demand encouraged developers to press ahead with projects.
Commercial real estate development also picked up speed, while the growth in civil engineering work slowed as flood-relief work earlier in the year dried up.
Moore said that the construction PMI data over the second quarter pointed to the sector growing by more than 1 percent over the three-month period.
Official data released last week showed that Britain's construction output rose by 1.5 percent in the first three months of 2014 and was 6.7 percent higher than a year earlier - the biggest annual rise in three years.
The PMI figures pointed to ongoing momentum in the sector, with new orders coming in at the fastest rate since January.
Investors in construction companies also see bright prospects, after the BoE was less stringent than feared last week when it introduced measures to stop home-buyers borrowing more than they can afford.
The central bank has said that a shortage of new homes is the underlying reason for Britain's fast-rising house prices, which have increased by around 10 percent in the past year, and almost double that in London.
Mortgage lender Nationwide said earlier on Wednesday that British house prices rose by 1 percent in June and were 11.8 percent higher than a year earlier - the biggest annual rise since January 2005. Prices in London in the second quarter of the year were 26 percent higher than a year before. (Reporting by David Milliken; Editing by Hugh Lawson)