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23rd November 2015
The latest official ONS output figures show falling construction activity, for the first time since 2013 Q1. In 2015 Q3 construction output fell by 2.2% from the previous quarter and was even down a slight 0.1% on a year earlier. This is a far cry from the pace of growth seen over the last two years. In 2014 Q3 output was 8.6% up on a year earlier and even in 2013 Q3 volumes were 5.1% higher than one year before.
The loss of momentum has been largely due to the repair and maintenance sector: activity has now fallen for four consecutive quarters. Spending has declined on both non-residential assets and household improvements.
Glenigan data recorded a freeze in new project starts from April through to July this year, as construction clients sat on their hands and awaited the outcome of what appeared to be a highly uncertain general election. Starts remained subdued during the early summer months, as decision makers digested the unexpectedly clear-cut outcome and mobilised project teams.
This contraction in new projects has fed through into falling new build output, which fell by 2.2% compared to the previous quarter. Contracting private housing and commercial work were the lead causes of the decline. New build work had steadily risen for over two years until this point.
However Glenigan data, which is more immediately available and is a lead indicator of overall work volumes, has charted a subsequent acceleration in activity as delayed projects are started on site. The private housing and commercial sectors in particular have come back strongly since August. During the three months to October, the value of new project starts was 6% higher than the same period in 2014. As such, we expect construction output to strengthen in the new year, even if the statistics may remain relatively weak in the coming quarter.
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