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UK construction activity climbs to 7-month high in June

U.K. construction activity in June rose to its highest level in seven months, driven by increased residential work and commercial building, IHS Markit and the Chartered Institute of Procurement & Supply said.

The IHS Markit/CIPS UK Construction Purchasing Managers' Index went up to 53.1 in June from 52.5 in May, the third straight month above the 50 mark that signals expansion.

The rise in construction output was mainly supported by residential work, which remained the most active area, and the fastest pace of expansion in commercial building since February. However, engineering activity growth fell to a three-month low.

"Survey respondents suggested that improved opportunities for industrial and distribution work were the main bright spots, which helped to offset some of the slowdown in retail and office development," said Tim Moore, associate director at IHS Markit.

New orders grew at the quickest clip since May 2017, lifting the outlook for near-term growth and helping push companies to hire at their strongest pace in a year.

"It appears the brakes are off for the construction sector," said Duncan Brock, group director at the CIPS. "Despite being hampered by economic uncertainty, firms reported an improved pipeline of work as clients committed to projects and hesitancy was swept away."

Meanwhile, construction firms grappled with the fastest increase in cost burdens since September 2017 due to higher transportation costs and rising prices for steel-related inputs.

While construction activity improved in June, "the sector is not out of the woods yet and there needs to be further sustainable activity to be convincing," warned Brock, citing the "hit and miss" performance so far in 2018 and lower than average business confidence in June.