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At first glance the latest set of new orders figures from the Office for National Statistics make for disheartening reading; during the first quarter of the year the volume of new orders was 10% below the level seen during the final quarter of last year. The data released at the end of last week are a stark contrast to initial estimates of industry output, which show growth of 0.3% during the first quarter of this year. Does this fall point to further weakening of construction activity during 2013?

A closer look at the new orders data show that the overwhelming majority of the weakness came from the infrastructure sector; which saw orders decline by 50% from the final quarter of last year. The dramatic fall comes however from a very high base in the final quarter of last year, in fact the level of infrastructure orders seen at the end of last year has only been surpassed on two occasions since the ONS started recording the data; once in the third quarter of 2009 and previously in the third quarter of 1987 (which included the contract for the Channel Tunnel!). 

Looking at last year as a whole infrastructure orders totalled £10.5bn. This is slightly below the high of £10.9bn seen in 2009, but well above the long run yearly average of just under £7bn, all on a volume basis. So while the decline in the first quarter is disappointing, it does not yet signal a renewed decline in sector prospects. Indeed the strength of orders last year actually bodes well for 2013 and Glenigan has already seen significant strengthening in starts for both infrastructure and utilities projects during the past couple of months as these orders filter through to work on the ground.

Other news from the new orders shows that the value of industrial and commercial orders increased from the final quarter of last year, up 11% and 3% respectively. Whilst orders in both sectors are still running at well below pre-crisis levels, they are also well above the lows seen in the past couple of years suggesting that the worst has passed.

Orders for housing over the same period were essentially flat; social housing orders down 0.3% and private housing up 0.3% from a strong final quarter of the year; however combined residential orders were the highest since the first quarter of 2008 suggesting the sector is in a period of accelerated recovery. Orders for public sector other new work were also strong, up 10% compared to the final quarter of 2012.

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