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ONS data revisions: Rewriting five years of history

Looking at the latest data covering August, most people’s focus will be on the fact it was the first annual fall in construction output since May 2013 and that private housing slowed.

What was more interesting, however, is that the Office for National Statistics revised its data going all the way back to Q1 2010.

If there is one thing people hate, it is rewriting history.

Some of the changes made by the ONS were understandable, some of the others less so.

Looking at the ONS’s original reporting of the data, construction output in 2013 was said to have increased by 0.4 per cent compared with 2012, before growing 9.5 per cent in 2014 compared with 2013.

However, materials sales rose considerably in 2013 and I can’t imagine that contractors were buying materials a year in advance.

Oddly divided

Over the two years, this combined 10 per cent growth had been broadly in line with what contractors and materials producers had indicated to us, but the profile appeared wrong.

“If there is one thing that people hate, it is rewriting history”

In the revised data, the ONS now reports that construction output grew 1.6 per cent year on year in 2013 and by 8.1 per cent in 2014.

This equates to around the same 10 per cent growth over the two years, but with a more realistic profile.

In addition, looking at data for Q1 2015, the ONS originally reported that activity fell by 0.2 per cent compared with Q4 2014.

This appeared strange, as firms across the sector, whether architects, consultants, contractors, builders’ merchants or materials producers, were not reporting that activity fell.

The revisions now show activity in Q1 2015 having risen by 0.2 per cent quarter on quarter.

Again, this is more realistic.

Increased accuracy

The ONS has been able to make these adjustments by using more accurate output price deflators.

The output price deflators strip inflation out of the actual construction output data.

The reason for this is that when output, rises 10 per cent, for example, what we are interested in is whether it was mainly due to a rise in work on the ground or due to prices.

“As time goes on the ONS gets more accurate information on inflation in construction”

As time goes on, the ONS gets more accurate information on inflation in construction.

For the data since Q1 2013, the output price deflators have been revised and the seasonal adjustment has been changed.

More puzzling is the data for Q2 2015.

Originally, the ONS reported that total construction output in Q2 grew 0.2 per cent compared with Q1. Now, it has revised growth in Q2 to 1.4 per cent.

Furthermore, the main reason for this increase is that the ONS has added an extra £1bn into the infrastructure sector in the first half of this year.

One billion!

If you can explain where that came from you’re a better economist than me.

Dr Noble Francis is economics director at the Construction Products Association

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