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Construction GDP falls 2.2% as Q3 output dips

Construction’s contribution to GDP dipped by 2.2 per cent in Q3 2015 after output fell in both July and August, according to figures from the Office for National Statistics.

Construction was the only economic sector of the four main industries - the others being services, production and agriculture - to suffer a decline during Q3 2015, with the industry now recording a downward contribution to GDP of 0.14 percentage points.

By contrast, services increased by 0.7 per cent; production was up by 0.3 per cent, while agriculture grew by 0.5 per cent.

The construction industry still accounts for around 5.9 per cent of GDP.

The decline in construction is the first recorded since Q1 2013, when the industry saw a dip of 1.3 per cent. It is also the largest fall since Q3 2012, when the industry declined by 2.6 per cent.

Earlier in October, the ONS reported that construction output fell by 1.3 per cent in August, while output levels were the lowest recorded in 2015 to date and the lowest in terms of volume since April 2014.

However, July’s data, which initially suggested that construction output had declined year-on-year, has since been revised upwards from £10.41bn to £11.04bn, meaning that August’s data showed the first year-on-year fall in output since May 2013.

Markit chief economist Chris Williamson suggests that it would be “unwise to put too much emphasis on this early estimate” for construction output, as figures for construction “tend to be heavily revised”.

“Survey data paint a contrasting, brighter, picture of construction sector growth, buoyed in particular by housebuilding,” he added.

The ONS estimes that construction output for September will grow by 1.3 per cent, based on forecasts and early responses to its September business survey.

This tallies with data from the Markit/CIPS construction PMI, which suggested that construction activity hit a seven-month high in September.

Commenting on the data, Construction Products Associaton economics director Noble Francis said: “Recovery is never a straight line and there are always a few bumps and scrapes along the way. 

“Projects in the pipeline across most construction sectors suggest that activity in the industry will rise in 2016 and our forecasts anticipate 4.2 per cent growth in total construction next year, driven by recovery in house building, commercial and infrastructure activity. 

“Skills shortages, however, are proving to be a key issue constraining growth for the industry.”

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