Construction output falls 2.2 per cent - but it's not as disappointing as it looks

 
Emma Haslett
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Output in the construction sector fell 2.2 per cent month-on-month in October (Source: Getty)

Growth in the UK construction industry rose by a modest 0.7 per cent in October compared with the year before, and contracted 2.2 per cent on the previous month. Does this mean the sector - which has until recently put in a reliable performance - is beginning to suffer?

It's worth pointing out that the Office for National Statistics, which published the figures today, spent a full page of its release voicing concerns over the quality of its construction output data.

So the fact growth in the industry fell to its lowest since November 2013 is probably not as much of a cause for concern as it otherwise might be.

To further restore market confidence, the figures also showed orders had risen by 5.3 per cent during the third quarter, following a rise of just four per cent in the second quarter.

And digging down further, orders for private commercial work rose 22.4 per cent quarter-on-quarter, while private housing orders rose 12 per cent and infrastructure rose 8.1 per cent (and may rise further in the next quarter, thanks to the government's "roads revolution").

Howard Archer, chief European economist at IHS Global Insight, said the sector is "still strong overall", although he did warn that it may not continue to be the economic powerhouse it was in the first months of this year.

Given the concerns over the quality of the construction output, the marked revisions to the past data and the monthly volatility of the data anyway, it is probably best not to put too much weight on October’s 2.2% drop in construction output. On the face of it though, it does look like construction will not provide much help to the economy in the fourth quarter.
Update: This article has been amended to show construction grew 0.7 per cent year-on-year in October, rather than contracted.

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