Construction bounces back to see rise in output

Figures have shown the industry is enjoying some growth. Picture: Paul Parke

The Office for National Statistics (ONS) said the sector grew by 0.9 per cent on the previous month, below economists’ forecasts of a 2.2 per cent uplift, but a welcome bounce back from a  1 per cent contraction in May.

The ONS noted: “Despite this increase the data for June 2015 continues a run of relatively weak monthly growth.”

It blamed an easing of housebuilding activity for the slowdown in construction growth.

The official data for June follows a recent industry snapshot for last month, which indicated that house building grew at one of the weakest rates for more than two years as the post-election bounce showed signs of fading.

The Markit/Cips purchasing managers’ index survey for the construction sector revealed that while house building remained the fastest growing area, it expanded at the second slowest pace since June 2013 amid soaring building costs, skill shortages and stretched sub-contractor availability.

It also found that sub-contractor charges rose at one of the fastest rates since the survey began in 1997.

The wider construction index showed a reading of 57.1 in July, down from 58.1 in June and lower than expected by most economists. But it remained well above the 50 level that separates growth from contraction.

Yesterday’s ONS data showed that, overall, for the second quarter of the year, construction output edged up 0.2 per cent, compared with the first three months of 2015, boosted by rises in infrastructure building and other public work.

The ONS added that the second quarter construction figure is higher than the flat output estimate it used to calculate gross domestic product (GDP) for the quarter last month.

But it added this small upward revision to construction did not point to any material revision to the ONS preliminary estimate of 0.7 per cent GDP growth in the second quarter of this year.

Construction output in June was 2.6 per cent higher year-on-year, below economists’ forecasts of a 3.3 per cent rise but still the fastest growth since March.

Scotiabank head of European fixed income strategy Alan Clarke said the construction figure for June was “disappointing” but added the “upward revisions to the back data took some of the sting out of the reading”.

Construction makes up less than 7 per cent of Britain’s economy, but the data is volatile, especially on a monthly basis, and can contribute to revisions to overall GDP.

Construction output fell sharply after the financial crisis and has been slow to recover. The sector gained pace early last year but then weakened.