Brian Green on ... orders and output

The latest official construction output figures reveal a sharp 14% monthly decline in work done in April compared with March.

The biggest hit was to repair and maintenance, which was down 18%. The larger slice of overall activity that is new work fell by 12%.

This is very dispiriting for an industry that is being bombarded with bad news, not least the recently recorded quarter-on-quarter drop of 19% in new orders won at the start of this year.

So, how worried should the industry be about these grim numbers for orders and output from the Office for National Statistics?

Such falls viewed in isolation suggest a dramatic collapse. That’s clearly not happening. The figures, therefore, must be seen in context.

In the first quarter of 2010, there was a rise in new orders of 26.3%, and output rose 10.2% in February and 18% in March. But this was mainly owing to the general election, which signalled a shift in public spending and a hiatus in activity. In this light, the recent figures do not look too disturbing.

But what is the likely underlying trend? What we discern from the output figures is that the surge in construction work prompted by the previous government’s fiscal stimulus seems to be fading.

The orders figures reveal a similar pattern, with a downward path measured on an annualised basis appearing to take grip mid-last year.

We’d expect this as construction rebalances towards less public and more private work and we wouldn’t expect a smooth transition.

Sadly, orders in the private sector look weak.This doesn’t mean it will not eventually fill the void left by a public sector. It just means it will take longer than many might hope. Meanwhile, we’re heading once again into recession.