The UK November Markit PMI construction index increased slightly to 52.8 from 52.6 the previous month. This was stronger than the consensus forecast of a decline to 52.2 and the strongest headline reading for 8 months.
Business activity and new orders increased at the fastest pace since March and there was a sharp deterioration in supplier performance as supply issues continued.
There was strong activity in the residential house-building sector, although the pace of expansion did moderate, while there was the first expansion in the commercial sector for six months.
Civil engineering maintained a weak tone and underlying uncertainty surrounding the economic outlook was still a key factor weighing on the construction sector.
There was a further increase in costs with the inflation rate at the highest level for over five years with price fluctuations having a negative impact on overall confidence and tending to deter activity.
Employment increased again for the month with a strong increase in sub-contractor usage.
The data will maintain optimism surrounding the near-term outlook, although there will still be concerns that underlying uncertainty will delay key construction projects over the medium term. There are no immediate implications for monetary policy.
Sterling edged fractionally lower after the data, although international trends were the dominant issue as GBP/USD drifted to 1.2600 from 1.2615. Gilts followed global bonds higher as risk appetite deteriorated with the FTSE index declining by over 0.8% on the day.
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