There’s further support for the argument that January wasn’t really as bad as the construction output figures might have us think.
The official figures showed a sharp drop in output in January just when most people were expecting an upward surge as firms made good for lost time during snowbound December.
I speculated in a blog then that there may be a lag related to the way firms fill in the returns that feed into the monthly output survey. The thought was that the January figure probably contained data on work actually done in December, hence the fall.
Well the latest Index of Services data for activity by firms renting machinery and equipment (broadly speaking plant hire) rose sharply in January, reaching a monthly activity level seen only once since October 2008.
The link between the ONS figures for renting machinery and equipment and the construction output figures is very strong, as the graph below shows. This is a graph I have used before which takes the construction output index and the Index of Services monthly data for renting of machinery and equipment converted to quarterly numbers and rebases them to 100 at March 2000.
So if the link holds and the speculation that January’s output figure was a really a partial reflection of December’s inactivity, then we might expect a bounce in February.
Well we’ll see on April 8.