Private housing props up lagging construction output

ONS figures published today show that construction output in November rose by 0.4% in both monthly and annual terms. However, monthly data are volatile and on a rolling three-month basis, output declined 2.0%. This was the largest fall since August 2012.

Output, however, remains at historically high levels. Construction output peaked in March 2017, reaching a level that was 31% higher than the lowest point of the last five years, January 2013. Following the month-on-month increase in November 2017, construction output is now 27.6% above this level.

Construction output fell by £779 million in the three-month on three-month time series. This fall has been broadly driven by decreases in private commercial work, infrastructure and total housing repair and maintenance.

The majority of other sectors were broadly flat in November 2017, with only private housing providing a positive contribution to growth, increasing by £100 million; representing the fifth consecutive period of growth in this sector.

Construction output in November 2017 increased by £55 million compared with October 2017. This increase has been driven primarily by an increase in the value of new housing work, with private housing increasing by £111 million and public housing increasing by £13 million. The only other notable increase came from total housing repair and maintenance, which increased by £18 million in November 2017.

The only negative contributions to growth came from infrastructure and private industrial work.

Total all work increased to £12,811 million in November 2017. This rise stems from increases in both total all new work, which grew to £8,229 million and total repair and maintenance, which increased to £4,582 million.

Compared with November 2016, construction output also grew 0.4%. In contrast, month-on-year growth in all new work was flat. The continued growth in both public and private new housing work was offset by falls in all other types of new work, including infrastructure and private commercial work, which fell 4.1% and 2.2% respectively.

Positive growth is also evident in the three-months on year time series, with the 1.6% growth in all work occurring as a result of sustained growth in all new work, and repair and maintenance. The 1.3% increase in all new work was driven primarily by growth in private housing, which grew 6.7%.

Rebecca Larkin, Senior Economist at the Construction Products Association, said, “Today’s data confirm what has been signalled by early indicators and industry surveys – that construction ended 2017 on a weak note. Past falls in new orders, particularly in the commercial and public non-housing sectors, now appear to filtering through into lower volumes of work. On a three-month basis, commercial output fell 5.4%.

“It now looks impossible that the industry avoided a full quarter of contraction in Q4, with the £30 billion private housing sector contributing the only positive story. Therefore, construction is set to have caused a drag on overall UK economic growth during the quarter.

PHOTO CREDIT: Robin Webster

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