Construction Growth Slows Upward Yearly Trend

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Construction Growth Slows Upward Yearly Trend

In January 2017, construction output fell by 0.4% compared with December 2016. This negative month-on-month growth comes in the wake of 2 consecutive months of strong growth in the last 2 months of 2016, driven mainly by falls in repair and maintenance. Despite this, construction remains 2% higher in comparison with the same period in the previous year.

The monthly figures (see the graph above) show that despite construction falling month-on-month, construction output actually grew by 1.8%, in part due to strong infrastructure and housing growth.

Infrastructure, and private housing repair and maintenance continue to sustain strong quarterly growth, increasing at rates of 4.0% and 5.4% respectively. Only private industrial work, and non-housing repair and maintenance provided downward pressure on 3 month on 3 month growth. Compared to January last year, January 2017 saw private new housing grow 7.4%, and private housing repair and maintenance increase by 9.7%. 

All new work showed signs of flattening out with growth of 0.1% in January 2017, but continued to grow in the latest 3 months compared with the previous 3 months at a rate of 2.1%.

Despite falling month-on-year for the thirteenth consecutive month, infrastructure grew month-on-month for the third time in a row, increasing 3.5% in January 2017.

Overall annual construction output growth has increased for 2016, to 2.4% from 1.5%, due to upward revisions for all 4 quarters, including a revision of 0.8% in Quarter 4 (Oct to Dec) 2016, from 0.2% to 1%.

However, new orders fell by 2.8% in Quarter 4 of 2016, driven mainly by falls in private industrial and private commercial work. Despite this, the annual volume of new orders is now at its highest level since 2008.

Rebecca Larkin, Senior Economist at the Construction Products Association, commented: “Following an increase in output in Q4 last year, the overall fall in construction output in the opening month of 2017 was disappointing, with a decrease in housing, industrial, commercial and RM&I activity over the month.

Continued Weaknesses
“Furthermore, the construction new orders data from the ONS suggests that there may be continued weakness in activity in some sectors during 2017. Commercial new orders tailed off in the second half of 2016 and in Q4 were 10.6% lower than in Q3 and fell 24.1% from a year ago, and new orders in the industrial sector were the lowest in two years. Building work in both sectors requires a large up-front investment for a long-term rate of return and it appears decision-making has been clouded by a rise in economic uncertainty”, Rebecca Larkin added.

“Taking total new orders growth of 2.9% in 2016 as a whole, however, shows there remains an impetus for construction activity over the next 12 months. As echoed in our CPA forecasts, output during 2017 will be driven by higher orders for housing – both private and public – as well as infrastructure and new public sector buildings such as schools and hospitals.”

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