Construction continues to boom despite contradictory data
Chris Williamson, chief economist at Markit, has commented on the latest construction data released by the Office for National Statistics.
He said: “The UK construction sector suffered a 3.9% slump in output during August, according to the ONS. Output was down 0.3% on a year ago, the first such annual fall since May of last year. We suspect, however, that this is a wholly inaccurate representation of the sector’s health, and that construction in fact continues to boom.
“We question the value of the official construction data due to the scale of revisions that occur after the data is first released. The signals about the health of the sector and the economy as a whole can be utterly misleading as a result.
“Last month, for example, the ONS reported that construction output had been flat in July, continuing a period of stagnation seen during the second quarter. However, the ONS now estimates that output rose by an impressive 1.9% in July after a substantial gain of 0.7% in the second quarter.
“Buoyant survey data suggests that even the upwardly revised official data for prior months has understated the true pace of expansion so far this year, and indicates that growth accelerated further in the third quarter. The Markit/CIPS Construction PMI showed the sector growing at its fastest rate for 17 years in the three months to September.
“This strong upturn is also by no means purely a symptom of a booming housing market; businesses are investing strongly in property development as the domestic economic outlook remains more favourable than at any time since the financial crisis. Development of offices, retail and industrial property is all growing rapidly, according to the PMI, a trend corroborated by signs of commercial property development picking up again in September after a summer lull.
“The strong performance of the construction sector indicated by the surveys adds to evidence that the economy continued to grow at an encouragingly robust pace in the third quarter. We expect GDP to have risen by 0.8%, given the data currently available for the period, though we ignore the latest figure for construction from the ONS in this estimate, as the chances are that it will be revised to show a completely different trend next month.”
