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Stormy with Bright Spells

The ONS April figures for construction output, unlike the weather, provided no surprises today. The forecast is still gloomy for most sectors – dark skies remain going forward with occasional bright spells emerging from private housing.Annual output fell by 1.1% in April, the slowest rate in more than a year. Amid accumulating signs that a return to health of the overall economy is imminent, we at the Association are cautiously optimistic that the woes of the construction sector are starting to lessen.

News that the £100 billion a year sector – which accounts for around 7% of GDP – could be showing signs that the storm is abating has been well received by pundits looking at the midday press. But hope can be a dangerous thing in times of hardship and we know that the non-seasonally adjusted construction figures can be volatile. Nevertheless, it still comes as a relief that the numbers were, at the very least, what we were had expected.

Infrastructure R&M contracted both on a yearly and monthly basis, by 21.6% and 3.8% respectively, but given government boosts to road spending and planned rail investments this is likely to be a blip and for the year we expect growth overall. The effects of austerity continue to resonate, and “public sector other” (mainly schools and hospitals) experienced the largest contraction of all sectors, 7.4% on a monthly basis and 25.2% on a yearly basis. On the upside, Funding for Lending and Help to Buy continue to provide support for private housing, which grew by 3.6% month-on-month and by 6.3% year-on-year.

With Q1 affected by the severe weather, we expect some degree of catch up in Q2, and further into the year the possibility of growth. Today’s figures support our expectations that we are approaching the nadir, with the sky over the construction sector expected to clear further as the year goes on.

By Kallum Pickering at 14 Jun 2013, 16:29 PM


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