Construction output stagnates in July as rapid expansion in housebuilding starts to level off
Construction output in the UK was disappointingly flat in July, prompting a dip in the annual growth rate to an eight-month low of 2.6 per cent, down from from 5.3 per cent in June.
It marked the slowest rate of growth in the sector since November and was significantly lower than its recent peak of 9.4 per cent in January, according to the data from the Office for National Statistics.
The stagnant figures support the theory that the boost in private house building has started to level off following rapid expansion earlier in the year.
Slowing rate of growth: Stagnant construction output figures for July from the ONS support the theory that the boost in private house building has started to level off following rapid expansion earlier in the year
The construction industry was hard hit by the 2008 financial crisis and only began to grow strongly last year boosted by Britain’s economic recovery, low interest rates and government programmes such as Help to Buy.
However, recent data showed property sales dipped for the first time in two years in August, according to the Royal Institution of Chartered Surveyors, with its estate agents dramatically downgrading their outlook for house prices.
The same Rics report also said the number of agents predicting property prices to keep rising this year has halved since a month ago, while in another sign of a cooling in the UK housing market, Bank of England data last week showed mortgage approvals dipped in July.
Today's ONS data said private sector home building rose 1.1 per cent on the month in July, down from 2.0 per cent in June.
The annual growth rate slowed to a five-month low of 15.9 per cent, with housing now accounting for more than a quarter of new building work.
The weakening growth trend for new housing looks set to continue, with orders in the second quarter of 2014 down 4.3 per cent, compared with a 3.8 per cent rise for all new work.
But there was some cause for cheer: the ONS highlighted a 9.6 per cent rise in private commercial orders, driven by plans for new shopping centres.
And according to this month's Markit/CIPS UK construction purchasing managers’ index, published last week, construction output in August grew at its fastest pace in seven months, boosting job creation in the sector in spite of a strain on the availability of sub-contractors.
Rocking the foundations: The weakening growth trend for new housing looks set to continue, with orders in the second quarter of 2014 down 4.3 per cent, compared with a 3.8 per cent rise for all new work.
The Markit/CIPS index came in at 64.0 for August, up from 62.4 in July, with the seasonally adjusted reading exceeding forecasts and remaining well above the 50.0 threshold separating expansion from contraction.
Markit said the steep increase in construction output reflected strong contributions from all three broad areas of construction - housing, commercial and civil engineering.
Howard Archer, chief economist at IHS Global Insight, remained upbeat about construction output for the year despite today's ONS data.
He said: 'Construction output still looks likely to see decent expansion in the third quarter and to contribute to GDP growth, having been only flat in the second quarter.
'Specifically, construction output was up by 0.6 per cent in the three months to July compared to the three months to April.
'Housing market activity has slowed but should remain decent going forward while the government is looking to support house building.'
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