Construction industry data raises hopes of GDP revision

Britain’s construction output fell by almost 4% in the second quarter of 2012, which is less than ONS estimations

Output from Britain’s construction industry fell by almost 4% in the second quarter of 2012 and has dropped by almost a tenth in the past year, according to official figures.

A moribund housing market and a big fall in public infrastructure work meant activity in the sector declined to levels last seen at the depths of the 2008-09 recession. The performance in the three months to June, however, was not as bad as the Office for National Statistics had feared when estimating the latest growth figures.

The ONS had factored in a 5.2% fall in construction output when it announced last month a 0.7% drop in gross domestic product, extending the UK’s double-dip recession into a third quarter.

But on Friday it said the decline was 3.9%, raising hopes that the second quarter GDP figure will be revised upwards later this month.

City analysts said the new data for construction would be enough to add 0.1 percentage points to growth, and followed data for manufacturing earlier this week that was also less poor than the ONS had anticipated.

Howard Archer, UK economist at IHS Global Insight, said : “The current indications are that GDP may ‘only’ have contracted by 0.5% quarter-on-quarter in the second quarter. And the hope is that if the hit to both industrial production and construction activity from the extra day’s public holiday in the second quarter was overestimated by the ONS, there may also be an upward revision to services activity, which was reported to have contracted by 0.1% quarter-on-quarter.”

The ONS said output from public infrastructure projects was down 8.6% between the first and second quarters of 2012 and was down almost 25% on the second quarter of 2011, when work on the London Olympics was under way. Construction industry figures said the outlook for the sector was poor.

Steve McGuckin, managing director of the construction and programme management consultancy Turner & Townsend, said: “All the sunshine and Olympic feelgood factor in the world can’t hide the fact that these are black days for the construction sector. Stagnation has moved from the stuff of nightmares to the new norm. The big drop in infrastructure output is of particular concern for the economy as a whole.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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