Construction output continues to fall

ONS figures published last week (8th December) show that construction output in October fell by 1.7% and was 0.2% lower compared with one year earlier. New orders in Q3 rose 37.4% over the quarter and 25.5% on an annual basis.

Rebecca Larkin, senior economist at the Construction Products Association, commented: “The data confirm that previous falls in new orders over the last twelve months are beginning to translate into lower construction activity in the commercial and public non-housing sectors. In addition, output in private housing RM&I, the third-largest sector, has now fallen for two consecutive months and taken in conjunction with the recent decline in new car registrations, suggests consumer willingness to spend on big-ticket purchases is being constrained by the fall in real wages.

“With regards to new orders in Q3, the strong headline growth rate was driven by infrastructure, reflecting the award of phase one contracts for HS2, a project worth £55.7 billion overall. As the ONS points out, new orders growth rates this high were only previously recorded when contracts for the Channel Tunnel were awarded in 1987. This aligns with the CPA’s forecast of infrastructure as the primary driver of output growth over the next two years.

“Excluding infrastructure, new orders rose 4.1%, including a 35.4% increase in public housing, to the highest in three years as work accelerates under the Shared Ownership and Affordable Homes Programme. However, the data for new orders signals that the weakness in the commercial and public non-housing sectors is likely to continue.”