Steep fall in new house building
New house building slowed at its steepest pace for nearly four years in May according to official figures published as the Chancellor announced major reforms to boost the sector today.
The 5.8% fall was the sharpest since October 2011, helping drag the wider construction sector to a 1.3% contraction - its worst fall since February last year - according to the Office for National Statistics (ONS).
There was better news for the economy from separate ONS figures showing that the UK's trade deficit fell to its lowest level since June 2013 in May, down to £393 million from £1.8 billion in April. The pound rose a cent against the US dollar.
However the fall in the trade deficit was the result of the imports decreasing rather than overseas sales powering ahead - as exports remained unchanged.
The construction data highlights the challenges facing the industry as George Osborne sets out plans which will see developers automatically given permission to build on suitable disused industrial land.
More derelict brownfield plots could also be seized for development and major infrastructure projects including housing fast-tracked under the measures.
The slump in housebuilding in May reverses a steep rise of 5.3% in the previous month. The contraction in the wider sector is the second month in a row that it has shrunk, with the decline deepening after a 0.5% fall in April.
Construction was only 1.3% ahead of its size a year earlier, the ONS data showed.
Comparing the three months to May with the previous three months, the sector was 0.4% smaller - suggesting it could drag on overall growth in the second quarter, following a lacklustre start to the 2015 for the wider economy.
Construction had shrunk by 0.2% in the first quarter.
ONS trade figures showed the deficit in goods narrowed to a better-than-expected £8 billion - the lowest level since June 2013. But the deficit in April was revised upwards from £8.6 billion to £9.4 billion.
A surplus in services for May was flat at £7.6 billion.
Today's data follows disappointing figures from the manufacturing sector earlier this week, showing a second month of decline.
Chris Williamson, chief economist at Markit, said: "Trade, manufacturing and, possibly, construction are all likely to act as drags on the economy in the second quarter, constraining economic growth to around 0.5%.
"Although up on the 0.4% expansion seen in the opening quarter of the year, this is considerably weaker than late last year, reflecting how unbalanced the upturn has become this year.
"The weakness of the manufacturing sector in particular means economic growth is once again overly reliant on the service sector, and consumers in particular, which should be a worry for politicians and policymakers alike."
Housing Minister Brandon Lewis said: "We have got the country building and these figures prove it with new house-building output from March to May up by nearly 10% on the same period last year.
"Thanks to our efforts housing starts are at a seven-year high with around 800,000 additional homes delivered since the end of 2009. A recent report by Markit/CIPS also showed that house-building is spearheading the revival of the construction industry with confidence in the sector at its highest for 11 years.
"That is because we have put house-building at the heart of our long-term economic plan. This has included investing billions of public and private funding in affordable house-building, while at the same introducing schemes like Help to Buy and Starter Homes to help thousands of aspiring home-owners take their first step on the property ladder."