Weekly Economic and Construction Update – 17 May 2024

Weekly Economic and Construction Update – 17 May 2024

Date Published

19 May 2024

Document Type

Category

Author

Jennie Ward

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Summary

Be cautious using the output data as the ONS appears to have been consistently overestimating output since 2022. The issues appear to affect all sectors but are most visible in housing RM&I, as previously highlighted by the CPA. The ONS problems may be due to two reasons: ONS underestimating prices and so overestimating volume when removing price from the value data, plus survivor bias in its contractor survey when grossing up to the whole industry due to the sharp rise in insolvencies.

Construction output in a weather-affected March 2024 was 0.4% lower than in rain-affected February and 2.2% lower than a year earlier but it was still 3.0% higher than in January 2020, pre-pandemic, according to the ONS. Given the impact of the poor weather in Q1, Q2 may see catch-up although note that it may occur on larger sites, most smaller sites lack the capacity to ‘catch up’ so work generally just ends up being pushed back.

Private housing output, which correlates more strongly with completions than with starts, in March was 3.5% higher than in February due to a degree of catch-up in activity after rain-affected February but 10.7% lower than a year ago and 22.5% lower than the October 2022 peak, just before the full impact of the Mini Budget initial spike in mortgage rates.