Construction to fall 2% in 2012, says CPA

This is a slight revision to its forecast of six months ago, when it predicted a 2% fall in 2011.

The construction new orders published on Friday by the Office of National Statistics showed a 23% fall in 2011 Q1 compared to the final quarter of 2010. However, the CPA points out that the overall trend for the last 12 months shows a 7% fall.

CPA economics director Noble Francis said: “The fall in orders for this quarter follows a 26% increase from the previous quarter at the end of 2010. These two figures show that quarter on quarter the situation is very volatile. To achieve a more accurate picture of the longer trend it is better to look at the orders over the last 12 months and compare these with the previous 12 months. Over this period orders were 7% down with significant falls in the public housing, education and health and infrastructure sectors, only partially offset by rises in private housing, commercial offices and retail sectors.

“Looking at orders in the latest 12 months compared to the previous 12 months, public housing orders were 8% lower, education and health orders were 18% lower and infrastructure orders were 32% lower. This indicates the start of the public sector spending cuts that we had anticipated since the Comprehensive Spending Review and we would expect this fall in orders to feed through into construction output from the second half of the year.

“On the plus side, private housing orders during the last 12 months were 45% higher than during the previous 12 months. Commercial offices, retail and leisure orders were 6% higher over the same period. Both of which indicate a continued recoveryin private sector construction.

“However, the sharp nature of the public sector spending cuts appears as though they will outweigh private sector recovery in the short term and, as a consequence, we forecast that construction output will fall in 2011 and 2012, by 1% and 2% respectively, before private sector recovery starts to drive growth in the construction industry as a whole.”

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