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Construction Products Association downgrades forecasts for 2015 after output slows in Q3

The Construction Products Association has downgraded its forecasts for 2015 and 2016 after output weakened in Q3.

In its autumn forecasts published today, the association points to output growth of 3.6 per cent in 2015 and 3.8 per cent in 2016, revised down from the summer forecasts’ expectation of 4.9 per cent and 4.2 per cent respectively.

The revisions followed data from the Office for National Statistics, released in November, that suggested construction output fell by 2.2 per cent in Q3 compared with Q2.

The CPA attributed this slowdown primarily to weak results in housing and commercial activity.

The revisions are the second successive downgrades made by the CPA: its summer forecast of 4.9 per cent for 2015 was revised down from its spring prediction of 5.5 per cent.

The association said the slowdown was “expected to be temporary”.

However, it also revised down its four-year outlook, with output growth now set to hit 19.7 per cent between 2015 and 2019, down from the 21.7 per cent predicted in its summer forecasts.

Private housing starts are expected to rise by 7 per cent in 2015, followed by growth of 5 per cent in 2016, while office construction will grow by 8 per cent and 7 per cent in 2015 and 2016 respectively.

Roads construction is set to double by 2019, while output in the energy sector will grow by 118.1 per cent over the same period.

Infrastructure will continue to be a major driver of output growth, with an increase of 13.2 per cent forecast for 2015, followed by 7.6 per cent in 2016 and double-digit growth each year to 2019.

Private housing output will grow by 10 per cent in 2015 but is projected to slow in the medium term, hitting 5 per cent in 2016 then 2 per cent in 2017, 2018 and 2019.

CPA economics director Noble Francis said: “While growth prospects in construction remain positive, there are significant risks. 

“Government austerity focuses on current spending rather than capital investment but the risk remains that if government cannot reduce current spending as much as it anticipates, it may cut public construction projects to achieve its aims of eliminating the public sector deficit. 

“In addition, within the construction industry, the key concerns regard skills shortages, which have already been reported in the housing sector but may become more prevalent across the wider industry over the next 12 to 18 months due to the forecast growth.”

Dr Francis added that increasing activity in city regions such as Birmingham and Manchester would help to boost the offices sector, but “a consolidation of expansion plans” by supermarkets would constrain growth rates through to 2019.

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