LONDON (Reuters) - Britain's construction sector recorded its biggest rise in activity in two years last month, including the first rise in house-building since just after former Prime Minister Liz Truss' mini-budget, a survey showed on Thursday.

The S&P Global UK Construction Purchasing Managers' Index rose to 54.7 in May from 53.0 in April, beating the median forecast for a fall to 52.5 in a Reuters poll of economists and reaching its highest since May 2022.

The upturn follows weak official data in the final quarter of 2023 and the first quarter of this year. Output fell 0.9% in each period, the largest declines since mid 2021.

"Firms are gearing up for further growth in the months ahead, posting renewed expansions in both employment and purchasing activity as workloads increase," S&P economics director Andrew Harker said.

The all-sector PMI - which includes results from the larger services and manufacturing sectors earlier this week - dropped to 53.1 from April's one-year high of 54.0 due to slower growth in the services sector.

Activity in civil engineering, commercial construction and housing all rose. House-building increased for the first time since October 2022, just after Truss' budget plans led to a surge in borrowing costs and a sharp fall in house purchases.

"Firms linked higher new orders to the winning of new contracts and the commencement of previously delayed projects," S&P said.

Raw material costs rose at the slowest pace this year but the cost of subcontractors rose by the most in nine months.

The Bank of England is looking closely at wage growth and services costs as it weighs when this year to start cutting interest rates from their current 16-year high.

Financial markets have lowered their expectations for this in recent weeks and do not fully price in a first quarter-point rate cut until November.

(Reporting by David Milliken; Editing by Toby Chopra)

By David Milliken