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11/07/2014, Britain's
construction sector has suffered its sharpest slowdown for more than a year
after housebuilding activity stalled in May, in the latest sign the property
market may be coming off the boil.
Construction output dropped 0.8% over the three months to
May from the previous three months, the biggest fall since October 2012,
according to the Office for National Statistics. The more volatile monthly figures
showed that in May alone, construction output dropped 1.1% from April as
private housebuilding stagnated but public housebuilding grew.
Construction output in May was up 3.5% on a year earlier,
but that was the slowest pace of annual growth for six months.
The latest official numbers contrast somewhat with a poll of
businesses published last week that suggested construction activity surged in
June. Housebuilding was the main driver as the Markit/CIPS construction PMI
rose to a four month high of 62.6 in June from 60 in May, where anything above
50 indicates growth.
Chris Williamson, chief economist at the compilers of that
survey, Markit, said the latest official numbers should be interpreted with
caution given they may well be revised.
"The data leave us scratching our heads, as surveys and
anecdotal evidence from the sector point to booming business conditions.
There's a strong likelihood that either these latest number will get revised
higher or that June will see a strong rebound," he said.
"Even with this disappointing construction number, the
official data available so far and the PMI surveys indicate that the UK economy
enjoyed another robust economic expansion in the second quarter, at least
matching the 0.8% growth seen in the first quarter. Once the volatility in the
official data is accounted for, there's also little sign of momentum waning as
we move into the second half of the year."
But Howard Archer, chief UK economist at IHS Global Insight,
said the latest construction numbers were "another blow to second quarter
growth hopes" following news this week that industrial production dipped
0.7% in May and figures on Thursday showing the trade deficit widened.
"Until recently, it had looked highly likely that GDP
growth in the second quarter at least matched the 0.8% quarter-on-quarter
expansion achieved in the first quarter, but this is now looking increasingly
questionable," said Archer.
Construction, which accounts for around 6% of the economy,
was hit hard by the recession and still remains around 10% below its pre-crisis
peak. Housebuilding has helped drive the sector's recovery and is up almost 20%
on a year ago, according to Friday's official figures. But policymakers have
warned that the supply of new homes still lags far behind what is needed to
meet demand in the UK.
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