Experian revises forecasts as output growth weakens

The construction industry will fail to meet predicted growth levels over the next few years, according to economic data from Experian, a market analyst.

The firm has revised its predictions for construction output from this year to 2008, after a weaker than expected performance by the repair and maintenance sector.

The biggest change is for 2006, with output expected to grow 0.9%, rather than the 2.9% that Experian predicted in its annual summer forecast. Predicted output growth for next year has been cut back from 3.6% to 2.5% and that for 2008 has been pruned to an increase of 3.7%, rather than 3.9% as first forecast.

James Hastings, head of construction futures at Experian told Building: “The main thing contributing to the downward forecast is the repair and maintenance sector. It is dropping about 11% year-on-year.” He believes public authorities are scaling back on maintenance to rein in budgets.

However, Hastings said the construction industry was buoyant, pointing to last week’s figures on construction order. They showed that orders rose 8% to £33m in the 12 months to September, while orders in the third quarter of this year rose 4% to £8.1m on the same quarter last year. His concern is that the industry might have little room for growth because it working at full capacity.

Tony Williams, founder of construction consultant Building Value and adviser to Experian, said the growth figures still backed an upbeat prognosis. He noted: “It’s growth deferred rather than gone away. The outlook is still rosy and with projects like the Thames Gateway and the Olympics, the pipeline is full.”

• The Purchasing Manager’s Index rose to 58.1 in last month, from 53.6 in September, the highest reading since March 2004. Allan Wilén, economist at the Construction Products Association, was cautious about the figures. He said: “The PMI covers mainly larger contractors. Some of our members are finding things harder.”