Construction industry suffered heaviest slump for 17 months

The construction industry suffered its heaviest slump for 17 months in November while an upturn in manufacturing came to a standstill in a double dose

A Bellway construction site worker
A Bellway construction site worker

The construction industry suffered its heaviest slump for 17 months in November while an upturn in manufacturing came to a standstill in a double dose of gloom for the economy.

The official figures prompted fears that the pace of the UK’s recovery may have slowed at the end of last year.

Output from construction fell by 4% compared to the previous month, the Office for National Statistics (ONS) said, with private house building off 3.2% despite the resurgence in the property market.

The overall decline in the sector was the steepest since June 2012 and follows a 2% rise the month before. It will dampen optimism about economic recovery and heighten fears that rising demand for housing – bolstered by Government initiatives such as Help to Buy – may not be met by supply.

The sector is still performing at well below its peak, although output in November was up 2.2% when compared with the same month in 2012. Separate ONS figures showed that manufacturing output was flat in November, as improvements seen in the previous two months slowed to a standstill. They are likely to make gloomy reading for policy makers keen to see UK factories roar back to life to re-balance economic growth - which has so far been reliant on domestic consumer spending.

The wider measure of industrial production, which includes mining, power generation and water, was also flat. The figures prompted predictions that gross domestic product (GDP) growth will have slowed in pace for the final three months of last year. Azad Sangana, European economist at Schroders, said: “Despite the wave of optimism on the UK economy, the evidence suggests that the economy slowed in the fourth quarter of 2013.

“We forecast fourth quarter GDP growth to slow to 0.5% from the 0.8% recorded for the third quarter.”

However, Samuel Tombs of consultancy Capital Economics, said the strength of the dominant services sector suggested fourth quarter growth will have matched the 0.8% increase seen in the third quarter.

Howard Archer of IHS Global Insight said the figures added to the need for interest rates to remain at 0.5% to try to develop sustainable growth – even if unemployment falls to the 7% threshold set by the Bank of England to reconsider the policy.

He predicted GDP growth narrowing to 0.7% for the fourth quarter, saying fears of a slowdown were reinforced by evidence that retails sales have been struggling.

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