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The State of the Construction Industry

Mar 13th 2018 11:03am


The construction sector started the year in recession as commercial building work slumped and private housebuilding slowed, while manufacturing has had its longest run of growth since records began, official data has confirmed.

Friday’s construction output figures made particularly grim reading. In January output was down month-on-month by 3.4 per cent, the steepest drop in the series since 2012, driven by a fall in the volume of new work.

The Office for National Statistics (ONS) data was in line with other survey findings from the beginning of the year, which showed the construction sector had reported its lowest rate of growth in four months.

“Luckily the initial release is someone sitting in [the Office for National Statistics] with a random number generator . . . ” tweeted Rupert Harrison, a portfolio manager at BlackRock.

Mr Harrison, a former adviser to George Osborne, is not being entirely self-serving. The construction output figures do have some problems.

First, many construction companies respond to the ONS’s survey late. Second, the ONS has been relying on an interim measure of construction prices, used for inflation adjustment, since what was then known as the Department for Business, Industry and Skills stopped collecting cost data in 2015.

Third, as the ONS has only been collecting construction output for a while, the seasonal adjustment, which is most important in January, is not quite perfect and is heavily affected by new data. The ONS wrote about all of these problems last year here when corrections led to big upward revisions to the output figures.

As Noble Francis, economics director at the CPA, tweeted, these problems (particularly late responses) have led to upward revisions to the figures recently.

Even a more recent separate survey, gathered after January (the period that was covered by Friday’s ONS publication) hinted that the sector is in fact recovering with Manufacturing in particular proving this with a ninth consecutive month of consecutive growth.  

Still, saying all that, the construction figures chime with weak surveys of purchasing managers in the sector and in January the outsourcing behemoth Carillion went out of business. The figures may not be perfect but I doubt it was anything other than a bad month for the industry.


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