Construction new orders decline signals weakness in 2019

Data from the Office of National Statistics, published yesterday, shows that construction output rose 2.7% in January, but was 0.6% lower on a three-month basis, owing to weakness in three of the largest sectors of activity during the period: private housing, commercial and private housing repair, maintenance and improvement (RM&I). The ONS release also showed that the volume of new construction orders in 2018 Q4 fell 1.9% compared to Q3 and was 10.5% lower in annual terms.

Rebecca Larkin, senior economist at the Construction Products Association, commented: “Combined, private housing, commercial and private housing RM&I account for half of total construction output so any weakness in these sectors will provide an unavoidable drag on overall activity. The last three months of data have been as volatile as the political backdrop, but looking at the broader picture, output has remained at relatively high levels over the last 12 months.    

“New orders in 2018 declined to the lowest level since 2012 and there are clear struggles to gain traction in the commercial and public housing sectors. Investment decisions on major offices and retail developments have stalled, not surprisingly, due to the lengthy period of economic uncertainty, but the record-low level of new orders in public housing is concerning given the government’s shift in policy focus to increase building by local authorities and housing associations.”