UK construction output fell 3.9 percent in August

UK construction output declined by 3.9% in August compared to July, the Office for National Statistics (ONS) informed on Friday. The ONS pointed out the July’s revision from 0% to +1.9% impacted August’s m-o-m growth contraction.

August’s contraction reverses a prolonged period of expansion in the UK’s construction industry.

All new construction work in August declined by -4.8%, with all types of new construction except public new housing posting falls. Infrastructure work fell by -6.5%, private commercial by -5.6%, private housing by -5.5%, private industrial by -4.9%, and public other by -2.4%.

The largest contributor to the overall decline in construction activity came from the drop in private housing, the ONS emphasized.

Repair and maintenance (R&M) also posted an August decline, with non-housing R&M falling by -2.6%.

George OsborneAugust’s figures will come as a slap on the face for the Chancellor of the Exchequer, George Osborne, who insists that new transport infrastructure construction is crucial for sustainable growth.

Output in the construction industry in August 2014 fell by -0.3% compared to August 2013, which is the first decline since May 2013 (-1.7%).

The figures will come as a blow for the UK Treasury, which has boasted that house-building is part of the solution to the country’s current housing crisis.

August’s construction decline is expected to reduce the third quarter GDP growth figure by about 0.1%.

ONS often inaccurate

Economists point out how the ONS figures clash with other surveys, such as the Markit-CIPS construction reading of 64.2 for August. Any figure above 50 points to increasing activity.

The Guardian quoted chief economist at Markit, Chris Williamson who described the ONS’ data as “wholly inaccurate.”

Mr. Williamson said:

“We suspect this is a wholly inaccurate representation of the sector’s health, and that construction in fact continues to boom. 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.”

On Friday, the ONS also published UK’s August trade figures, which showed that the deficit narrowed to £1.9 billion from £3.1 billion in July.