ONS Reports Construction Output Contrary to Industry Surveys, Says CPA

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ONS Reports Construction Output Contrary to Industry Surveys, Says CPA

ONS figures published today (see below) show that construction output in March fell by 3.6% month-on-month and by 4.5% compared with one year earlier.  In addition, the data report that construction output in Q1 as a whole was 1.1% lower than in Q4 and 1.9% lower than one year ago.

Professor Noble Francis, Economics Director at the Construction Products Association, commented:  “Contrary to today’s report, all other surveys of activity across the entire construction industry supply chain, from the largest contractors to the smallest SMEs, have reported an increase in activity during the first quarter of the year compared to the previous quarter and the previous year, albeit at a slower rate than previously. 

“It is disappointing to see that the ONS construction output data do not currently reflect this, but we anticipate that ONS data will be revised upward, as has happened previously.  At this time last year, the ONS reported that output declined 1.1% in 2015 Q1 on a quarterly basis and declined by 0.3% on an annual basis.  Following later data revisions, however, ONS reported that construction output increased 1.9% in 2015 Q1 compared with the previous quarter and rose 6.2% year-on-year. 

“Significant revisions to ONS’s construction output may occur due to late data returns, revisions to output price deflators and seasonal adjustment.  In addition, the ONS has also stated in its release today that the timing of Easter means that March’s construction output data will be subject to larger than normal data revisions.

Richard Threllfall, Partner and Head of Infrastructure Building & Construction at KPMG agreed. He comments:

"Apologies ONS, but I just don't believe today's output figures. They don't ring true with what the industry is experiencing on the ground, with strong demand across all segments and growing order books. Yes, the housing sector had a weaker than expected start, but is warming up nicely in the Spring sunshine, and the civils market remains very strong thanks to pipelines of activity in road and rail. Sweepstake, anyone, on how long before we see an upward revision of the numbers?"

 

The ONS reported:

In Quarter 1 (Jan to Mar) 2016, output in the construction industry was estimated to have decreased by 1.1% compared with Quarter 4 (Oct to Dec) 2015.

Downward pressure on the quarter came from all new work which decreased by 0.6% and repair and maintenance (R&M) which decreased by 1.9%.

Between Quarter 1 (Jan to Mar) 2016 and Quarter 1 (Jan to Mar) 2015, output was estimated to have decreased by 1.9%.

In March 2016, output in the construction industry was estimated to have decreased by 3.6% compared with February 2016. All new work and repair and maintenance both reported falls of 3.6%.

The preliminary estimate of gross domestic product (GDP) for Quarter 1 (Jan to Mar) 2016 published on 27 April 2016 contained a forecast for construction output of a fall of 0.9%. This estimate has been revised downwards by 0.2 percentage points within this release based upon updated survey responses; output is now estimated to have decreased by 1.1%. This downward revision to construction output has no impact to 1 decimal place on GDP growth.

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