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The UK construction sector defied expectations in May 2024, posting a surprise year-on-year increase of 0.8%. This marks a significant turnaround from the downwardly revised 2.1% decline seen in April.
The positive growth, the first since January, was driven by a surge in repair and maintenance activity (7.7%), the strongest increase in four months. New work also showed signs of improvement, with the decline narrowing to -4.0% compared to -9.4% in the previous month.
Looking at the monthly figures, construction output grew by 1.9% in May, reversing the downwardly revised 1.1% drop from April. This positive trend was attributed to both new work (up 2.7%) and repair and maintenance (up 0.8%), with warmer weather likely contributing to the uptick in activity.
Across construction sectors, eight out of nine reported growth, with private and public new housing leading the way alongside non-housing repair and maintenance, which rose by 3.5% and 2.1% respectively.
The news from the manufacturing sector was also positive. Manufacturing production rose by 0.4% month-on-month in May, recovering from an upwardly revised 1.6% fall in April and meeting market expectations.
Growth was observed in seven out of 13 sub-sectors, with the strongest contribution coming from the manufacture of food, beverages, and tobacco (up 1.7%), driven primarily by a surge in alcohol production.
However, year-on-year growth in manufacturing remained subdued, reaching 0.6% in May compared to a downwardly revised 0.4% decline in April. This fell short of market forecasts of a 1.2% gain.
Finally, industrial production mirrored the trend in manufacturing, rebounding by 0.2% month-on-month in May after a 0.9% fall in April. This increase was in line with market expectations.
The recovery was primarily driven by growth in the manufacturing sector (0.4%), particularly food, beverages, and tobacco (1.7%). Production in mining and quarrying, as well as water supply and waste management, also increased, albeit at a slower pace.
However, the electricity, gas, and air-conditioning supply sector saw a decline in activity (-1.9%). Year-on-year, industrial output reached 0.4% in May, following a 0.7% decrease in April, but fell short of market predictions of a 0.6% rise.
Overall, these figures paint a picture of a UK economy that is gradually recovering after a period of weakness. The construction sector’s surprise growth is a positive sign, while the manufacturing and industrial sectors are showing signs of stabilization.
However, some challenges remain, as evidenced by the continued year-on-year decline in manufacturing output.