Belfast Telegraph

Monday 22 September 2014

Building slowdown adds to the gloom

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A slowdown in the construction sector has added to gloomy figures suggesting the UK economy may not be recovering as quickly as hoped.

Figures from the Office for National Statistics (ONS) showed output from the sector shrank by 0.1% month-on-month in August after a sharp rise of 2.8% in July.

It comes days after separate ONS data revealed a double blow as manufacturing performance declined 1.2% in August, while the monthly trade deficit remained stubbornly high at £3.3 billion.

Analysts at Investec today cut back their third-quarter growth estimates for the overall economy from 1% to 0.8%, and reduced the full-year forecast from 1.6% to 1.4%.

The disappointing figures are likely to dampen the sunny mood of recent months inspired by burgeoning retail sales and improving performance across the main sectors of the economy.

Jeremy Cook, chief economist at currency broker World First, said: "The summer of strong UK data has suddenly come to an end, it seems."

The new construction data showed cutbacks in public sector activity and a fall in repair and maintenance among private households - amid a squeeze in real incomes.

But there were increases in private industrial and private housing work - the latter sub-sector, buoyed by Government initiatives such as Help to Buy, rose 1.6% and was up 18.1% year-on-year.

Chris Williamson, chief economist at Markit, said the construction sector was still on course to provide a boost to the economy for the third quarter of 2013. Output in August was 4% up on the same period in 2012.

But it is still struggling to recover from the damaging effect of the economic downturn, with figures earlier this year showing output remained 14.7% below its pre-recession peak.

Investec economist Philip Shaw said that although forecasts for the overall economy were revised downwards, large profits made by investors in the Royal Mail float could have a positive impact, potentially adding 0.6% to retail sales if all of the profits were spent on the high street.

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