Activity in the British construction sector rebounded moderately in May, supported by strong residential building activity, data from a survey by Markit Economics and the Chartered Institute of Purchasing and Logistics (CIPS) showed Tuesday. Economists had forecast the sector to remain in contraction.

The seasonally adjusted purchasing mangers' index (PMI) for the construction sector rose to 50.8 in May from 49.4 in April, and hit the highest level since October 2012. Economists had forecast a more modest increase to 49.8. Reading above 50 indicate expansion, while those below suggest decline.

Driving the turnaround, residential building activity increased in May at the fastest pace in more than two years Meanwhile, commercial construction and civil engineering activity recorded further contractions, though at slower rates compared to April.

New orders received by construction firms increased for the first time in one year. Reflecting the upturn in new work, production also increased for the first time since October 2012.

Employment levels in the sector were broadly unchanged during the month. Input costs increased for the fortieth successive month amid cost burdens from rising energy prices.

At the same time, confidence among entrepreneurs in the construction sector improved in May, with the majority of them anticipating a rise in output over the next twelve months.