Latest stats pour cold water on construction growth prospects and house building

Latest stats pour cold water on construction growth prospects and house building

For those who read the latest output figures and cheerily saw an industry enjoying boom level growth in the second quarter, here is a bucket of cold water from the national statisticians at the ONS – the new orders figures.

The fact that the orders figures are down is not totally unexpected. There was a clear and planned surge in public sector spending – some cynically suggesting that this was connected to the General Election in May.

This surge was always planned to ease about now whatever the shade of government that was elected. Obviously we knew that the Conservatives would cut deeper – a policy accepted by its bedfellows the Liberal Democrats when they signed up to the new coalition deal.

So we should be accepting of the downturn in orders for public sector work. Admittedly the first quarter figures will not reveal the full pace of decline, we need a quarter or so more to get a feel for the damage that will be wreaked by the cuts, the shelving and reappraising that is going on with the capital budget.

No, I think it is the pitiful performance of the private sector that should concern people. Admittedly – again – we only have one quarter and it was a bit caught up in the confusion around who would take up office in No 10. So some delaying of business decisions is to be expected with that kind of uncertainty.

But the rather nasty drop in orders in the private housing sector – admittedly after a recent surge – will disconcert a few (myself included). The private house building sector, given the historically low level of activity and the remarkable bounce back in house prices, was expected to be one of the better performers as the construction industry sought to drag itself from the mire.

You wouldn’t want to read too much into the figures, but certainly the 24% quarter-on-quarter seasonally-adjusted drop in the volume of orders for new private housing work is not really consistent with an industry poised for strong growth.

This certainly doesn’t look like a number set to please the new Housing Minister Grant Shapps, though he may have a different take on the data.

I’m not a regular reader of the Grant Shapps Twitter page and don’t follow him, though I probably might if I bothered with Twitter. But I will certainly be keeping an eye out periodically today to see if he tweets on this set of data, although he does have a busy surgery day, he tells us, so data might not be uppermost on his agenda.

He does though seem to be a fan on commenting on stats. I noted he was claiming success for localism when the housing starts figures came out on August 19. He tweeted: “New house building is up 13% as communities start to appreciate ‘New Homes Bonus’ means sustainable building makes sense.”

Interesting assessment I thought, as the policy only became apparent within the last few weeks of the quarter measured.

To my great credit I did, at the time, restrain myself from pointing out that while the housing starts figures may well be directly related to his policies, it was as likely as not to be down to fearful house builders laying foundations to hold onto nearly-lapsed consents concerned they would not gain new consents under the new planning regime.

That may of course be a silly interpretation of the data, as we all know you can pin almost any motivation to a change in figures and maybe I was being too damn cynical again.

Anyway I digress. Back to the orders data.

There are other worries in the figures in the private sector, notably those for commercial building. These too took a dive in the second quarter after rallying late last year. One can apply the same caveats as for house building when assessing the meaning of the figures in that they may well have been influenced by uncertainty.

The infrastructure figures also weakened, but I guess that is to be expected after a surge in orders over the past year or two. The second quarter figure was still well above the average over the past 10 years or so.

But if we were looking for an overall view of these figures the answer has to be to head for the current cliché and suggest they are consistent with a double dip.

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