Construction output falls less than expected

Construction output fell slightly less sharply in the first quarter than first thought, indicating the sector was less of a drag on overall GDP growth, official data showed on Friday.

The Office for National Statistics said construction output fell four per cent in the first three months, less than the initially reported drop of 4.7 per cent but still the biggest quarter-on-quarter decline since the start of 2009.

The statistics office said the revision, other things being equal, would imply an upward revision to first quarter GDP growth of under 0.1 percentage points.

However, surprisingly soft industrial output data implied a small downward revision to GDP, meaning a more flattering reading of first quarter growth is by no means certain.

Growth of 0.5 per cent in the first quarter barely made up for the contraction in the final quarter of 2010, meaning the economy has in effect stagnated since September.

The country is lagging well behind its main trading partners. Germany and France on Friday both reported a strong start to the year.

The small upward revision to first-quarter construction figures are unlikely to satisfy critics who believe the official series is underestimating the strength of activity on the ground.

Purchasing managers surveys suggest the sector has enjoyed steady expansion since the start of the year, and housebuilders Barratt and Bovis Homes both reported upbeat results earlier this week.

Friday's figures showed new private housing work dropped by 9.1 per cent in the first quarter while housing maintenance and repair fell 6.7 per cent. A bright spot was new infrastructure construction which rose 4.5 per cent on the quarter.