Monday, April 23, 2012
Construction - weak but not collapsing
Posted by David Smith at 09:00 AM
Category: Thoughts and responses

Two widely-watched measures of what is happening in the construction industry are provided by the Office for National Statistics and the Markit purchasing managers' index (PMI). as far as the industry is concerned, the former is showing too weak a picture - particularly for recent months - and the latter far too strong. This is the Construction Products Association's latest assessment, weak but not collapsing:

"Construction output is forecast to fall by almost 3% this year, according to the latest forecasts published today by the Construction Products Association, as the cuts to the capital budget announced in the CSR start to have a real impact on industry activity. Construction output is forecast to remain flat in 2013 before private sector work strengthens and drives a return to growth in 2014.

"Commenting on these forecasts, Michael Ankers, the Chief Executive of the Construction Products Association, said: ‘It seems inevitable that construction output fell in the first three months of this year and this will have had a significant impact on the rate of GDP growth at this time. With new orders for construction falling significantly at the end of last year, 2012 is going to be a difficult year for the construction industry with output forecast to fall by almost 3%.

"The construction industry accounts for nearly 9% of GDP and therefore is going to be a major constraint on growth in the wider economy over the year ahead. ‘Public sector spending cuts are now beginning to bite and with the exception of a steady recovery in the private housing market, where starts are forecast to increase by 5% this year and 11% next, the private sector is pretty subdued. What is particularly disappointing is the weakness of the private commercial market where output is expected to decline both this year and in 2013. Office development is slowing down and private finance for social infrastructure is unlikely to make a rapid comeback. ‘One bright spot in the forecasts is investment in infrastructure, particularly rail and energy where growth is expected to increase in each year from now until 2016.'

Meanwhile Danny Alexander, the Treasury chief secretary, has asked government departments to identify 5% of cuts to cover unforeseen circumstances. Damian McBride, formerly Gordon Brown's spin doctor, has suggested that when it comes to budgets there are no new ideas, only recycled ones. That is certainly true of this one. I've heard it before from previous chief secretaries.