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Friday, August 02, 2013

UK Construction Jumps

UK construction activity rose in July to its highest level since June 2010.

Reuters reports that the Markit/CIPS construction PMI rose to 57.0 July, up from 51.0 in June. The rise is mainly on the back of an increase in residential construction which has spurred an increase in confidence of purchasing managers.

Whilst the increase in residential construction is hardly surprising, given the increased stimuli to the sector offered by the Chancellor, the size of the increase in PMI is above expectations and as such is very welcome.

Tim Moore, senior economist at Markit said:
"July's survey highlights a new wave of optimism across the UK construction sector, with companies reporting a pace of expansion in excess of anything seen over the past three years."
Like it or not, the UK economy's bedrock is the property sector; by stimulating that sector the Chancellor has in effect stimulated the economy.

The question is, will this stimulation create an inflationary asset bubble?

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