Shocking yes, but we should have expected a sharp fall in construction output

Shocking yes, but we should have expected a sharp fall in construction output

Today’s estimated second quarter fall in construction output of 5.2% presented in the GDP data has caused quite a ripple of shock.

Should it?

Well I was a bit surprised by the scale of the fall. I had, when the latest output figures came out, suggested in a tweet that a fall of greater than 2.8% should be expected.

As it turned out workload in June was about on a par with the worst month recorded since the new construction output series started in January 2010.

I wasn’t expecting that as I fiddled with the numbers, so the 5.2% drop was a bit larger than I had in mind.

Perhaps I should have expected it. As someone who in June contemplated building an ark in the face rainfall of biblical proportions, I suspected June might be a bit of a washout for contractors.

Weather clearly has an impact on construction. Look at the early 1960s on the graph. You see output take a big hit from the heavy snows, but this is followed by a sizeable bounce back in workload.

I am not suggesting that June’s woeful figure was all down to rainfall or that there will be a major bounce back in the July figure. The trend is down and down pretty fast. But is seems fair to assume there is work held up in June that will need to be done quickly.

Construction output is volatile and having a chance to look over the data, the figures are plausible. That doesn’t make them other than uncomfortable the reading.

But I would not treat any constrution data as gospel. It is a notoriously tricky sector to measure. And there will always be issues around seasonal adjustments and the deflators used to convert cash values to volumes. These will remain and be used either side of any argument.

But it is the data we have to work with and probably the best we have.

As for what it means. To me it means no more or no less than I thought when I assessed the latest construction output data.

Growth in the private sector remains too frail to offset the decline in the public sector. We are certainly not seeing the kind of recovery in house building that perhaps we should.

This means that without Government support we are probably condemned to a couple more grotty years in construction.

After that who knows?

More importantly, the Government should act now to boost construction. If they are stuck for ideas I am always willing, along with plenty of others I know, to suggest measures that might help.

One thought on “Shocking yes, but we should have expected a sharp fall in construction output

  1. I agree totally that no-one should be surprised that construction output fell by 5.2% in the second quarter of this versus the first.
    Many building sites were a washout in April and June and building materials sales were down in double digits.
    One company reported that the weather accounted for the loss of six days of sales which in a quarter equated to a drop of over 8%.
    So why are people surprised?
    Yes, the overall trend is down – my estimate is a best case scenario of a fall of 5% to a worse case scenario of a 10% fall!

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