UK construction output falls further but set for positive contribution to second quarter GDP

UK construction output in the three months to May 2013 was 4.8 per cent lower than the same period last year, according to data from the Office for National Statistics.

Compared with April 2013, output was flat, with a 0.3 per cent increase in new work negated by a fall in repair and maintenance output of 0.5 per cent.

Thanks to a 4.6 per cent month-on-month increase between March and April 2013, construction output may have made a rare positive contribution to output growth in the second quarter of 2013.

Howard Archer, chief UK and European Economist at IHS Global Insight, says he estimates gross domestic product (GDP) expanded by 0.6 per cent quarter-on-quarter in the second quarter.

Indeed, even if construction output was only flat month-on-month in June, it would have still expanded by 2.2% quarter-on-quarter in the second quarter. This would translate into a positive contribution of 0.15 percentage point to quarter-on-quarter GDP. And latest survey evidence from the purchasing managers suggests that construction output expanded modestly in June.

However, construction has been one of the biggest downward pressures on total UK output in recent times, with output falling by 18.9 per cent in the five years since the first quarter of 2008, compared to a fall of 3.9 per cent in UK gross domestic product (GDP) in the same period.