Although new orders remain at historic lows, this is a second consecutive quarter of growth and potentially provides positive signs for the industry going forward.
Although fourth-quarter output was down 9.3% year-on-year, indicating a depressed performance, the strong rise in new orders, year-on-year, indicates a firm rise in output is ahead. However, this rise is from a very low base.
Commenting on the ONS figures, Construction Products Association economist Milja Keijonen said: “Output in construction fell 8% in 2012 and so the second consecutive quarter of growth in new orders provides some much needed positive news for the industry.
“New orders are a forward-looking indicator and it will take around 12-18 months before the industry sees the benefits of this in construction output. Private housing has a much shorter time-lag between orders and output so the 10% growth in private housing new orders in Q4, compared to the previous quarter and year, should lead to a rise in output this year.
“New orders in the commercial sector, the largest sector of construction, were 10% higher in Q4 than in Q3 and were 14% higher than one year ago. Despite this, commercial new orders remain 64% lower than the pre-recession peak so it is too early to get excited about a recovery in offices and retail construction.
“It was extremely disappointing that infrastructure new orders fell 15% compared to the previous quarter, fell 13% compared to a year ago and were 29% below the pre-recession peak. Government announced £1.3bn of capital investment to boost infrastructure in the Autumn Statement and it is essential that this is spent if the contraction in infrastructure is to be reversed.
“The £10bn of capital investment announced by the government over the last two years is yet to provide significant activity on the ground. If it were to occur, it would add an extra 0.8% to GDP, even without taking account of any wider benefits.”
Simon Rawlinson, head of strategic research at construction consultant EC Harris, said that the most eye-catching number within the latest ONS data was the revision of the third quarter data, meaning that 2012 saw a marginal increase in new orders of 0.4%.
He said: “In December we stated that infrastructure and the commercial sector would be the drivers of the recovery – and it is encouraging to see that these sectors saw a significant upward revision for the third quarter – totalling around £500m. Commercial saw a further increase in volume of £250m during the fourth quarter, albeit those levels of workload still remain at a historic low.
“Looking more widely, both industrial and residential maintained upward momentum, suggesting that some aspects of government growth policy may be having a positive impact – effects which were not apparent in December when the third quarter data was published.
“Two quarters of continued growth in orders have not been recorded since 2009, but the statistic is notoriously volatile, so it is best not to read too much into the trends. However, given that the construction industry is a sector starved of good news, this data will provide some relief to everyone in the industry.”
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