GDP growth, quarter on quarter, published on Friday morning caught everyone by surprise. 1.1% growth when 0.6% was the consensus among the forecasters. And it was driven by a ‘surge’ in construction growth, growing 6.6% in one quarter. Hmm... sounds good and I wish it were true. Remember it is only a first estimate and it does tend to be revised significantly.
Furthermore, looking at our surveys and those of CECA, FMB and RICS, you wouldn’t think it as pessimism still reigns within the industry.
What is clear is that the ONS figures show that construction output has risen in the second quarter compared to the first, although this is likely to only be temporary respite. A significant proportion of this increase is likely to be due to two main factors;
1) Catch-up following the poor weather in the first quarter (so Q1 work is lower and Q2 work is higher, doubling the effect)
2) Increased spending from Government last year and early this year feeding through
Both of those are potential explanations and we were anticipating that construction would show a slight rise compared to the first quarter although remaining at subdued levels overall. Both of these effects are only short term so despite the headlines, I’m still not optimistic going forward. As Brian Green pointed out, the more prescient figures were the jobs figures released earlier this month stating that contractors had lost 300,000 jobs in this construction recession, sorry former recession, and given that product manufacturers have lost an additional 100,000 it makes for sober reading. And this is before the effects of Government spending cuts mentioned in the budget.