Construction industry output slips in Q3

Published:  14 November, 2011

UK: The total volume of construction output in the third quarter of 2011 fell by 0.2% compared with the second quarter of this year, according to figures released by the Office for National Statistics.

The total volume of construction output in the third quarter of 2011 fell by 1.0% compared with the same quarter in 2010. All new work fell by 0.6% while repair and maintenance rose by 0.7% compared with the second quarter of 2011.

The volume of new private housing work in the third quarter of 2011 was 2.5% lower when compared with the previous quarter. New private housing output in the third quarter of 2011 was 0.7% higher compared with the same quarter in 2010.

New work in the public housing sector volumes in the third quarter of 2011 was 8.2% lower than the previous quarter and 8.9% lower compared with the same quarter in 2010.

The volume of new work in the public non-housing sector (excluding infrastructure) in the third quarter of 2011 was 0.5% higher compared with the previous quarter and 7.8% lower compared with the same quarter in 2010.

For housing repair and maintenance work (including improvement work) in the public sector in the third quarter of 2011 volume was 2.2% lower compared with the previous quarter and 6.5% lower compared with the same period in 2010.

Housing repair and maintenance work in the private sector in the third quarter of 2011 was 0.7% lower compared with the previous quarter and 6.4% lower compared with the same period in 2010.

The volume of repair and maintenance work in the non-housing sector in the third quarter of 2011 was 2.3% higher compared with the previous quarter and 8% higher compared with the same period in 2010. No comparison can be made for repair and maintenance split between private and public due to the introduction of an infrastructure repair and maintenance question in 2010.

Andrew Duncan, managing director of property at project management consultancy Turner & Townsend, commented: "These figures are further evidence of the strength of the bad economic headwinds buffeting the construction sector," he said.

"As the Eurozone debt crisis goes from bad to worse, a tidal wave of uncertainty is washing across the Channel, swamping any green shoots that may have sprouted in the second quarter.

"These third quarter figures will dash any hopes that the worst is over. Output has fallen in two-thirds of the industry’s sectors, and where there is growth it is both halting and fragile.

"Already low levels of confidence have been further eroded, and we've seen substantial belt-tightening in the private sector. The one, meagre, ray of light is the steady increase in levels of repair and maintenance work. But that cannot offset the dropping off of newbuild work.

"The omens for next year are not good, as the Eurozone saga shows little sign of abating, and the doubt it is sowing risks undermining the fragile progress made by the industry in 2011."

ONS has carried out further analysis of the estimation of non-responding businesses and has introduced an improvement to the current methodology. The previous method used to estimate for the non-response of businesses was to calculate the mean value of the growths for similar businesses between the values reported in the given month and the previous month. To remove the effect of any very large or small values, the top 20% values and bottom 5% were removed before calculating the mean movement between periods.

The resulting link factor was applied to businesses who had responded in the previous period, but not in the current period. In practice, when returns were received from businesses, it was found that the method used was understimating values. As a result, revisions were always in an upwards direction.

In order to mitigate this effect, a number of alternative methods were considered and the best performing method, based on the data received to-date, was comparing the ratio of the means of each group of similar businesses without any trimming.

The revised method has only been applied within the ONS' standard revisions policy so there is the possibility of a small discontinuity in the series between August and September 2010, the organisation stated.  

The survey design for the new monthly survey was introduced in January 2010. Since then, the ONS said it has been able to build a profile of activity, providing it with more data to test the initial design.

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