Construction output continues its rapid decline

Construction output continues its rapid decline

There is no getting away from the fact that the construction output data continue to look increasingly scary.

If we compare month on month the 12-month total output for construction we see the industry over the past three or four months shrinking by about £1 billion a month, or put another way about 1%. The graph shows the direction of the annualised output.

The big question is: when will the plunge stop? And that question highlights the most worrying aspect, in my view, of the figures we see today from the Office for National Statistics. It also brings home the worrying numbers in the orders data published last month.

The best hope for construction is a revival in the private housing and commercial sectors.  But these sectors are both flagging. Comparing the three months June to August this year with the same period a year ago shows private housing work down 12.1% and private commercial down 14.4%.

Looking up the pipeline is unlikely to fill our faces with a deluge of work. Orders for housing stand on an index basis at 52 and private commercial at 47.4, with the index based on 100 for 2005.

If that isn’t depressing enough those figures are not improving. They are down not up on a year earlier.

There are a number of factors that confuse analysis of the data, such as the impact on work of erratic weather, the Olympics and the Jubilee, which saw bank holidays shuffled and one created.

But in the grand scheme of things these are marginal. The message from the data is clear: the industry is in sharp decline.

And while a deep drop in public sector work was expected, the response from the private sector has been to accelerate decline rather than providing support.

Now to answer the above question of when will the plunge stop. There may be for statistical reasons a slight quarter-on-quarter rise this Autumn, but this will not represent an end to the underlying decline.

Looked at on an annualised basis (how much work done over the past 12 months) the optimists probably expect an end to the decline in output sometime mid to late next year. The pessimists don’t see signs of an upturn before the end of 2014.

So when the band of brooders David, Nick, George and Vince turn to construction to help pull the economy out of recession, they must realise that they have a large task just stopping it dragging the nation deeper into the mire.

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