Britain’s construction sector technically entered recession for the first time in five years today as output slumped, new official figures show.
Housebuilding continued to grow in September, but falls in infrastructure, public work and private commercial building dragged the overall output down 1.6 per cent in September, with output in the quarter down 0.6 per cent.
This means that the construction sector was effectively in recession as output contracted also in the second quarter, by 0.5 per cent.
Construction slump: The sector’s output fell for two consecutive quarters
However other sectors of the economy had a good month, with factories putting up a good performance in September and exporters seeming to benefit from a weaker pound.
Industrial production grew by 0.7 per cent month-on-month in September, recording its sixth straight month of growth for the first time in 23 years, according to figures by the Office for National Statistics.
Manufacturing was mostly responsbile for the rise, with output 0.7 per cent higher in September, driven by ‘robust growth’ in cars and medical equipment.
Chris Williamson, IHS Markit’s chief business economist, said the data points to a ‘multi-speed economy’.
‘The third quarter decline pushes the building sector into a technical recession for the first time since 2012,’ he said.
‘The overall picture is therefore one of the economy continuing to show relatively resilient growth, albeit with an undercurrent of heightened uncertainty surrounding Brexit posing downside risks to economic activity in coming months, especially business investment,’ he added.
Meanwhile, the UK trade balance with the rest of the world worsened. Trade deficit expanded by £3billion to £9.5billion for the three months to September, as imports of machinery and fuels helped offset a drop in aircraft imports.
Howard Archer, chief economic advisor to the EY ITEM Club said: ‘To quote Meatloaf – ‘two out of three ain’t bad’. Overall, the Bank of England will likely see the September industrial production, construction output and trade data as justifying last week’s interest rate hike.’
He added that while the outlook for manufacturing looked mixed, the outlook for construction looks ‘worrying’.
‘Weak economy activity and appreciable economic and political uncertainties threaten to be a highly challenging combination for the construction sector over the coming months. Elevated input costs are adding to the woes of construction companies.
‘Furthermore, there is the very real possibility that house building activity could be pressurised by extended tepid housing market activity and subdued prices amid weakened consumer fundamentals,’ Archer said.