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UK construction output falls sharply in February

By Michele Maatouk

Date: Wednesday 11 Apr 2018

UK construction output falls sharply in February

(ShareCast News) - UK construction output fell sharply in February, taking a hit from adverse weather conditions, according to data from the Office for National Statistics.
Output was down 1.6% on the month, which was better than the revised 3.1% drop the month before but much worse than the 0.9% increase expected.

On the year, construction output was down 3%, which was worse than the 2.5% drop predicted and the previous month's revised 2.1% fall.

The biggest decline was seen in repair and maintenance work, with private housing and infrastructure new work providing the only positive contributions to growth. Private housing grew by £232m in February, while infrastructure work increased by £60m.

Head of National Accounts Darren Morgan said: "Construction fell in the three months to February after an erratic couple of months, mainly due to a big decline in repair work. However, this was partially offset by growth in both infrastructure and housebuilding."

Pantheon Macroeconomics economist Samuel Tombs said the heavy snow in late February intensified the downturn that was already underway in the construction sector, with the decline in output broad-based.

"At this stage, it's impossible to determine confidently the degree to which the rapid fall in construction output reflects the bad weather, as opposed to a worsening trend in activity. Note, though, that output has trended down since the summer and fell by a hefty 3.1% month-to-month in January, before the bad weather hit. Meanwhile, output will fall by 2.9% quarter-on-quarter in Q1, subtracting a huge 0.17 percentage points from GDP growth, if it holds steady in March.

"GDP growth, therefore, looks set to undershoot the MPC's 0.3% forecast - now expect a 0.2% gain - the case for the Committee to be cautious and to hold back from raising interest rates in May."

Meanwhile, Blane Perrotton, managing director of the national property consultancy and surveyors Naismiths, said that only so much of February's slowdown can be explained away by the icy weather.

"Despite the modest upward revision to January's figures, the message from the first two months of the year is clear - activity is slowing and the brief burst of momentum seen at the end of 2017 is now all but forgotten.

"The bright spots are getting fewer and further between. Housebuilders continue to shine as low interest rates and a chronic shortage of homes keep demand burning bright. Infrastructure too offers some hope, with London's three flagship projects - the Thames Tideway Tunnel, Heathrow Q6 and Crossrail - together committing to more than £1.7bn of capital expenditure in 2018-19.

"But these strong points are increasingly looking like outliers, as commercial property demand cools and developers concentrate on completing existing projects rather than commissioning new ones."

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