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11/07/2014, Output slumped in the UK construction sector during May
in another surprise disappointment from the recovering economy.
The Office for National Statistics (ONS) said construction
output dropped by 1.1% between April and May after a sharp decline in private
commercial work. But year-on-year construction sector output grew by 3.5% in
May.
And there was a 1.1% rise over the month in housing output
after a sustained period of soaring demand in the property market.
A recovering economy and cheap mortgages thanks to the Bank
of England's record-low 0.5% base rate is fuelling housing demand. This is
pushing up house prices across the UK, tempting builders to up their
residential construction work and chase potential profits.
The monthly dip in construction output follows a similar
fall in the production sector. The ONS said its Index of Production fell by
0.7% in May, mostly because of a 1.3% decline in manufacturing output.
"Today's data will add to concerns that the pace of
expansion in the UK economy is starting to ease; industrial production figures
released earlier this week also underwhelmed many analysts," said Scott
Corfe, managing economist at the Centre for Economics and Business Research (CEBR).
"Although construction and manufacturing output are up
on a year ago, both showed a month-on-month dip between April and May, raising
concerns that the economic situation in the UK is starting to wobble after a
glowing period in which almost all data have been largely positive.
"CEBR cautions against being too concerned by the
latest construction and industrial output releases – it is just one month of
data and we expect both sectors to record expansion in June – but this may be
an early sign that the underlying pace of growth in the UK economy will
ease in the second half of 2014 and into 2015.
"This is consistent with CEBR's central forecasts – we
expect GDP growth to slow from 3% this year to 2.3% in 2015."
Corfe also warned that a skills shortage in the construction
sector may hold growth back in the coming months.
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