Construction Output Quarter Down with Slight Increase for July

ACCORDING TO FIGURES released by the Office for National Statistics (ONS today, construction output decreased by 0.8% in the three-months on three-months to July 2019; this was driven predominately by a fall in repair and maintenance of 2.2% with a minor contribution from a 0.1% fall in new work.

In repair and maintenance, the fall in the three-month on three-month series in July 2019 was largely because of the 6.3% decline in private housing repair and maintenance, with a smaller contribution from the 0.6% fall in non-housing repair and maintenance.

The slight .1% decrease in new work was driven by public other new work and private new housing, with falls of 6.2% and 0.5% respectively; these were offset by an increase in public new housing of 6.8%.

Overall, new orders in Quarter 2 (Apr to June) 2019 fell by 13.3% reversing the increase of 10.4% in Quarter 1 (Jan to Mar) 2019. This was driven by a 17.0% decline in all other work. All sectors, apart from infrastructure, experienced a decrease in comparison with Quarter 1 2019.

July construction output

However, looking at construction output measured month-on-month, there was 0.5% increase in July 2019. The growth was due to a 0.8% increase in new work along with flat growth (0.0%) in repair and maintenance.

This growth helps partially reverse the decline of 0.7% seen in June 2019 but continues a trend of subdued growth over the latest year.

After recording a record high in February 2019 in monthly construction output, the industry has experienced a downward trend. Over the longer term, the industry has experienced a slight upward trend in growth in the all work series since the start of 2017, however this is markedly slower growth in comparison to the period prior to 2017.

Construction figures comment

Clive Docwra, Managing Director of construction consulting and design agency McBains said:

“Although there was a moderate increase in output in July, the longer term trends show growth on a downward trajectory.

“For that reason, the industry will not be getting overly excited.  The continuing Brexit soap opera, the events of which become more bizarre and unpredictable daily, mean that spending decisions will continue to be put on hold until investors are more confident of the road ahead.

“Meanwhile, the weak pound means the cost of imported materials is squeezing pockets.

“All the signs point to a protracted slowdown in activity over the coming months.”

Gareth Belsham, director of property consultancy and surveyors Naismiths, commented:

“Even by the volatile standards of the construction industry, contractors’ order books have been subjected to both feast and famine this year.

“The surprise surge in new orders seen in the first quarter has been entirely wiped out after the calls simply stopped coming in the second quarter.

“But despite a largely grim backdrop of declining output, such extreme swings in new orders offer a paradoxical bright spot – as they hint at the depth of latent demand that is being held back as clients hold off on pulling the trigger.

“Yet there is only so long moth-balled projects and deferred investment decisions can be held back. After more than three years of crushing uncertainty, it’s no longer clear whether the deadlock stands a better chance of being broken by a ‘no-deal’ Brexit or another delay.

“For now the cost of Britain’s endless limbo is etched in both the balance sheets – and the confidence – of British builders. Construction output is falling, orders are tailing off and as last week’s PMI data showed, confidence has fallen to its lowest level since the dark days of 2008.

“With investors sitting on their hands until the final Brexit showdown ends – one way or another – the industry’s coolest heads are battening down the hatches and shoring up their capability up in hope of a surge of deferred investment in the final months of the year.”

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