July 16th, 2010
If you didn’t know what was coming, you could read the latest set of figures for construction orders and output as very promising indeed, with contractors both winning more work and doing more work in recent months.
In constant prices, output in the three months to May was as strong as in any quarter since the third quarter of 2008 – you remember the quarter in which Lehman Brothers collapsed and the world’s financial markets went into convulsions.
Certainly, after being technically in the second dip of a double-dip recession in the first quarter of this year, the new-look construction output figures (which provide monthly data) suggests that we will see a stonkin’ bounce back into growth in the second quarter.
And when we look at the output figures in the light of the orders data, things look even brighter. Orders for new work showed growth for four quarters on the trot in the period to the first quarter of this year, with housing leading the charge.
On the face of it this is a surprisingly good performance and if you ignore the real world you could be tempted into seeing this as an industry turning a corner into a sunnier street.
Sadly that’s what might happen in another world.
Because what we know is that the axe is about to fall and fall hard on the public spending which has driven much of the growth in construction activity through the recession.
In the three months to May more public money was spent on construction than in any quarter on record.
That isn’t totally surprising given the former Government appeared to be doing whatever it could to pump as much cash as it could into construction projects ahead of the General Election.
Well the new lot have put a stop to that.
And if that isn’t deflating enough, there’s the almost inevitable probability that a slice of the pre-Election boost wasn’t down to the General Election but to firms catching up on work held up by the hideous weather at the start of the year. This will put the latest figures into a very flattering light.
However, even bearing all the above in mind, there is room for some optimism. Private commercial orders and private housing orders are looking strong, which might form the basis of some cushioning from the private sector as the rug is pulled from under those supported by public spending.
But if I were a betting man I would be placing a large wager on the second quarter of 2010 as being a high water mark for construction activity over the next few years, with the output figures for March 2010 looking an ever more appealing aspiration.
I would, however, like to add a caveat – which rather reveals why I don’t gamble – the figures could be revised and make my expectations look very silly indeed.