The construction industry has held up pretty well recently, if we look at the bigger picture

Michael Dall

Last week’s headlines on the performance of the construction sector caused much consternation among those that follow the industry’s performance. The sharp falls in activity that were reported make good copy but as is often the case the devil is in the detail. I always prefer to analyse the trends over a slightly longer term rather than a monthly basis as that gives a better idea of what is actually happening.

Looking at the levels of output in the three months to July shows that activity actually increased compared with the corresponding months in 2014, suggesting that actually the construction sector has held up pretty well recently. This is despite the general election falling within that timeframe, which caused a hiatus in the housing sector in particular.

Not only has output been higher, contracts awarded over the last three months are also higher than last year. On the face of it then, the headlines from last week appear to be misleading, and actually if you analyse the sectors within construction there are signs that some areas are finally starting to perform well after subdued activity in recent years. Infrastructure in particular has rebounded sharply recently with output 17.9% higher in the three months to July than the same period in 2014.

There has also been a similar increase in the value of contracts awarded, which bodes well for future performance. Private housing output also increased over the last three months and continues to be the single biggest contributor to the industry in output terms.

It is not all good news however. Contract awards in private housing are down on this time last year, suggesting that the ability of the housing sector to continue growing at its current pace will be limited.

Add in the ever increasing skills shortages being reported in construction and there are plenty of reasons to temper the optimism. However, despite the headlines to the contrary, the construction industry remains in fairly rude health.

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Michael Dall is lead economist at Barbour ABI