Latest Office for National Statistics figures once again show decline in levels of output in construction industry
The latest Office for National Statistics (ONS) figures once again show a decline in the levels of output in the construction industry this month. The level of output in February was estimated to have declined by 0.9% compared to January and by 1.3% compared to February 2014. I have said before that the fundamentals of growth within construction remain strong and it is hard to see these monthly dips as the start of a decline.
However, it is worth considering something from the latest figures. Levels of output for private housing repair and maintenance were down considerably from the previous month and previous year. In February 2015 the value of repair and maintenance work was 2.7% lower than January and 7.9% lower than February 2014. These are not insignificant drops so it is worth considering what is causing them.
The latest ONS house price index showed annual house price growth was 7.2% in February; not an unhealthy rate, but down from a high of 12.1% in September 2014. In particular, house price growth in London was 9.4% in February, down from 20.1% in May 2014. The various measures brought in by the Bank of England last year and the reform of the Stamp Duty Land Tax in the Autumn Statement seems to be having an effect on the prime London property market. Might the impact of these changes for construction be falls in high value repair and maintenance contracts as gains at the top end of the property market decline?
It is too early to draw definitive conclusions but it is an interesting shift in a market where new housing continues to grow but the number of transactions and prices show signs of slowing. With housing a central issue in the election campaign, will more resources become available in the new build market as a trend away from the top end of the market develops? Given the chronic housing shortage, politicians from all sides would surely welcome that.
Michael Dall is an economist at Barbour ABI