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Housebuilding drives construction growth

Construction activity expanded again during May, driven primarily by growth in the rate of housebuilding.The latest Markit/Chartered Institute of Purchasing and Supply Purchasing Managers' Index stood at 60.0 during the month - down slightly from the 60.8 figure recorded the previous month but still well above the 50.0 no-change threshold.This marks the thirteenth successive month of expansion, although it is the slowest rate of growth since October 2013.Residential activity was the strongest-performing area of activity once again, despite the fact that growth eased to a three-month low.Improving economic conditions and greater underlying demand were cited as the main reasons behind the upturn in construction output, particularly in terms of investment spending and new housing starts.Employers are continuing to hire staff in response to growth in the sector and employment levels rose for the twelfth successive month, resulting in the longest period of sustained job creation since the period from mid-2006 to early 2008.Confidence levels remain high, with more than half of respondents saying they anticipate a rise in business activity over the coming year and just four per cent predicting a decrease.Sub-contractor availability fell at the sharpest pace since August 1997, despite the fact that construction companies reported a sharp decrease in the work undertaken by subcontractors in May.Meanwhile, the rates charged by subcontractors increased at the steepest pace since since the survey began over 17 years ago.Richard Threlfall, KPMG UK head of infrastructure, building and construction, said main contractors face rising costs as demand is outstripping supply."The construction supply chain took most of the pain during the recession, with many businesses going bust and output falling 20 per cent below its peak," he added.But over the last year demand has picked up sharply and main contractors are having to compete for the reduced capacity in the market. Now it is main contractors taking a thrashing and the supply chain holding the whip."Mr Threlfall said there is likely to be a further upswing in the rate of materials inflation due to the rapidly rising demand for construction materials. 

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