Housebuilding hands boost to economy

By SAM FLEMING FOR MAILONLINE
Updated:

New homes are being built at the quickest rate since the Northern Rock collapse, adding to signs of rising confidence in the UK economy.

An index tracking residential construction activity surged to nearly 59 in December, well above the 50 dividing line between expansion and contraction, according to the Chartered Institute of Purchasing and Supply and Markit.

That is the quest rate since August 2007 and it compares with lows of just 18 reached last year.

New Builds

Positive outlook: An index tracking residential construction has surpassed the dividing line between expansion and contraction

However, activity in the commercial and civil engineering sectors declined for the 22nd straight month, keeping the overall construction index at 47.1 in December.

The figures add to signs of revival in Britain's crucial property market, coming just a day after the Bank of England reported a doubling of new mortgage approvals.

Households expect the value of their homes to increase by 1 per cent over the next six months, according to a consumer confidence report from building society Nationwide released today.

'It's a big turnaround,' said economist George Buckley at Deutsche Bank. 'You are seeing a very rapid recovery (in home construction) but from very low levels of activity.

'You will see positive growth in the fourth quarter and an acceleration in 2010, but the question is do we get a snapback afterwards.'

An index of household optimism recorded a five point decrease in December to 69, its biggest fall since November 2008, according to Nationwide's report.

However, abroad Germany yesterday reporting a sixth straight fall in unemployment, suggesting Europe's largest economy is extending its gradual recovery from recession.

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