ONS suggests treatment of “outliers” may have led to exaggerated growth figures

The government has revised down its estimate of construction growth by more than a £1bn, in a move that is likely to knock 0.2% off the nation’s recorded growth.

The revision, which follows both the receipt of further data as well as a revision of the methodology of recent estimates, comes after many in the industry expressed surprise at the record growth figures for the industry in the last six months.

Today the Office for National Statistics said that growth in the second quarter had actually been 6.8%, rather than the 9.6% previously recorded. In addition, the decline in output in the first quarter was more severe than previously recorded, at 1.2% rather than 0.8%.

The figures show that third quarter growth in construction output was 4%, the same as provisionally estimated in the most recent national GDP figures.

In total the report leaves construction output at £25.8bn in 2005 prices, £1.1bn less than previously reported, according to construction economics commentator Brian Green. Recent construction growth has been a large factor behind the economy recording unexpectedly strong growth figures in the last two quarters.

The ONS told Building last month that it was re-examining previous data after concerns the recorded growth was far higher than the industry was actually experiencing. It said today: “Revisions to the output series in 2010 are due to late responses from contributors, revisions to the output price indices used to deflate the current prices to constant (2005) prices and due to seasonal adjustment.

“Further revisions to the 2010 series have come from a review of model parameters that are used for estimating output of non-responding businesses and in dealing with outliers (unusually large returns from businesses).”

The update said that construction output has now grown 8.6% since the third quarter of last year, with new work up a staggering 20.5%, and repair and maintenance down 9.6%.

In the quarter housing grew by 3%, infrastructure fell by 1%, and public sector output grew by 5%, despite government cuts. Industrial and commercial building rose by 15% and 7% respectively in the quarter.

  • See Brian Green’s blog here.