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Construction output disappoints as commercial building slides
UK construction output in November rose for the first time since August but growth remained weak and remained in decline at the underlying level.
Construction output rose 0.4% month-on-month in November after the previous month was revised down to a decline of 1.1%, following a drops of 1.9% in September. While the first increase in three months, the gain fell short of the 0.8% increase that had been expected.
In the latest three months output was down 2.0% compared to the prior three months, the largest decline since 2012.
A rise in housebuilding work was the cause of the sector's rise, with this the only construction sector to see growth over the three months to November, up 0.8%.
The steepest downturn was seen in private commercial building, which is a key bellwether of business investment, saw output drop 5.4% in the three months to November.
The construction sector was therefore likely to have endured a marked contraction in the fourth quarter, which will have been a third successive quarterly decline.
Economist Chris Williamson at IHS Markit noted that on average so far in the fourth quarter so far, construction sector output is down 1.8% compared to the third quarter, pointing to a further drag on GDP.
"The official data are in line with survey data which have likewise shown an export-led recovery in manufacturing in recent months while a beleaguered construction sector has become reliant on house building. Encouragingly, PMI survey data indicate that manufacturing fared well again in December and that the construction sector continued to show signs of stabilising somewhat after the downturn seen earlier in the year."
Williamson said the mix of soft and hard data so far suggests that fourth quarter economic growth could match, or even beat, the 0.4% expansion of GDP seen in the third quarter.
"The caveat is that business confidence about the outlook remains very subdued, highlighting downside risks to future growth if uncertainty intensifies, notably in relation the UK's trading relationship with the EU. However, in the absence of any upsets, it seems likely that the UK will continue to muster steady - but by no means impressive - growth over the course of 2018," he said, forecasting the economy to grow 1.2% in 2018.
Economists at Investec noted that the construction data is volatile and heavily prone to revision.
"Looking ahead to 2018, various supporting factors for the construction sector are set to come into play. Specifically, the Autumn Budget in November included a raft of measures focused on the housing market, both on the demand and supply-side, as such we may see some further firming in activity as the year progresses."