Brian Green on … construction output

Office for National Statistics figures for November show construction output shrinking on an annualised basis over the past three months. The official figures suggest that about 1.6% less work was done in November last year than in November 2010 and that output was down about 1% over the three months to November compared with the same three months in 2010.

Assuming there are no huge revisions, this seems to signal that the industry has entered a recessionary phase, as the ONS current price data seems to indicate. If construction output in December 2011 turns out to be as strong as December 2010, then we should see a rise of a bit more than 2% for the year, but a fall in the final quarter of almost 3%.

The big question is whether the government responds quickly and decisively

Given that December 2010 was the coldest in 100 years with snow falling in most areas and that December last year was very mild, there must be some hope of a better performance for construction. We’ll see.

The industry forecasters are expecting a lesser rise in 2011 than 2%, suggesting a sharper fall in the final quarter.

Leaving to one side weather effects, what the figures do reveal is that, excluding infrastructure, the sectors the industry is looking to for growth are stagnating. Growth in private housing and commercial construction has pretty much stalled since last summer. Meanwhile, the falls in the public sector appear to be accelerating.

Certainly the first few months of this year will be telling for the industry. The big question is whether the government recognises the importance of construction and is willing to respond quickly and decisively enough to cushion what might be a very nasty blow.

Big projects - like HS2 and the government’s £20bn infrastructure plan - make big headlines, but they don’t make a big impact very quickly.