Construction activity declined at the slowest rate for 18 months in August, adding to signs that the economy might be nearing a return to growth in the current quarter.

The purchasing managers’ index for construction showed business activity rose to 47.7 in August, up from 47.0 in July and closer to the 50 level that separates contraction from expansion.

The index has risen from an average in the second quarter of 42.8 and from a first-quarter average of 31.1.

Although construction makes up only about 6% of the economy, the sharp plunge in output in the sector has been a key factor in the depth of the recession. Construction declined 6.9% in the first quarter and dropped a further 2.2% in the second amid the commercial and residential property slumps.

Financial Times, Daily Telegraph