UK economic recovery set to continue in Q3 2014

Britain's economic recovery, currently the strongest among G7 nations, is continuing into the third quarter, according to the second batch of economic data released on this quarter's performance.
The July Purchasing Managers' Index (PMI) for the construction sector is 62.4 (above 50 represents growth), which is 0.2 down on June.
Construction is just 6 percent of national GDP, but forecasters, central bankers, and economists will look at the excellent figures not just as a signal of growth in the sector, but as a strong indicator that growth remains robust in all parts of the economy.
In addition, as only the second print of economic data for the UK third quarter (following manufacturing PMI last Friday) it has greater significance, adding evidence that Q3 is going to see growth, perhaps as much as the 0.8 percent growth quarter-on-quarter seen in both Q1 and Q2.
Within the sector figures, the housebuilding component was interesting -- hitting 68, the highest figure for this sector since summer 2003.
This high number represents a market response by builders to the demand for homes in Britain, where house prices are rising faster than inflation and the stock of housing has grown slowly since the start of the financial crisis.
The housebuilding sector figures indicate that Q3 will likely be even better than Q1, the last quarter where statistics are available, where 36,450 homes were started. The recent nadir for UK housebuilding was in Q1 2009, as the financial crisis bit deep into economic growth, and the Q1 figures were 113 percent above that trough.
The strong growth in housebuilding is having an immediate effect on the jobs market.
A shortage of skilled workers is developing in the sector.
At the end of the second quarter, the Federation of Master Builders reported that nearly a third (31 percent) of small or medium-sized builders could not recruit bricklayers, while 27 percent found plasterers equally difficult to find.
This will help drive up wages, but will not have an inflationary effect on the economy, because of the small size of the sector and because wage increases (annual increase 0.7 percent up to April) are lagging far behind CPI inflation (1.9 percent in the year to June).
Policymakers at the Bank of England (BOE) will see these figures as further proof that the economy is likely to be able to take a small rise in the Bank Rate from 0.5 percent, possibly as early as November, for the first time in six years.