Subdued growth conditions driven by a continued decline in private commercial work

The ONS have released their Construction output in Great Britain: January 2018 and new orders October to December 2017. Construction output contracted for the ninth consecutive period on a 3 month on 3 month basis, falling by 1.0%, driven mainly by the continued decline in private commercial work.  New orders decreased by 25% in Q4 2017 following a record high in Q3 2017. Indeed in 2017 total new orders increased by 4.3% overall, reaching the highest total since 2008, at £55,130m.

The IHS Markit/CIPS UK Construction PMI March 2018 report shows a continuation of the subdued growth reported across UK construction sector at the beginning of 2018. The Index registered 51.4 in February, a marginal increase from January’s four month low of 50.2, with the index being weaker than seen on average in 2017.

On a more positive note the February Economic & Construction Market Review, from Barbour ABI shows new construction contracts awarded in January 2018 was £5.4bn based on a 3 month rolling average. This is an increase of 11.6% compared to December 2017, but 10.6% lower than January 2017. And the latest growth indicator, from CBI, shows growth in the UK’s private sector picked up in the three months to February 2018, exceeding their expectations for modest growth.  With the balance of firms across the distribution, manufacturing and service sectors, reporting a rise in output at 20%, up from 9% in the three months to January 2018.

The construction material price index for all work also increased 5.1% in the year to January 2018, compared to a year ago. Construction materials prices for new housing, other new work and repair and maintenance rose 5.6%, 5.3% and 5.9%, respectively, in the year to January 2018.

NHBC reports a steady start to 2018 for new home registrations, as 11,733 new homes were registered to be built in the UK during January 2018, a 1% increase compared to the 11,607 registered in January 2017. And according to the Bank of England, in January 2018, the number of mortgages approved for house purchases increased 2.4% on an annual basis and 9.4% on a monthly basis to 67,478. This is the highest number approved since July 2017. In contrast UK Finance reports the number of mortgage approvals for house purchase reached 40,117 in January 2018, decreasing 9.4% on an annual basis but increasing 11.2% on a monthly basis, this being the highest number approved since October 2017.

However, according to the February 2018 RICS UK Residential Market Survey, the indicators for future activity in the UK housing market remains subdued, with new buyer enquiries across the UK falling for the 11th consecutive month as 16% more survey respondents report a fall, rather than a rise in enquiries.

The Halifax House Price Index reports that in February 2018 house prices were 0.4% higher than January. Yet annual house price growth slowed to 1.8% from the 2.2% recorded in January. The Nationwide House Price Index reports that in February 2018 house prices fell 0.3% following a 0.8% increase in January. And annual house prices slowed to 2.2% from 3.2% in January, consistent with the signs of a softening in the household sector in recent months.

Despite this Taylor Wimpey have released their full financial results for 2017, showing underlying profit increasing by 10% to £812m, saying that this has given them a strong start to the new year after building close to 15,000 homes in 2017.

Builders’ merchant Travis Perkins have also released their financial results for the year ended 31st December 2017, showing revenue growth of 3.5% in 2017. However they anticipate that the mixed market experienced in 2017 will continue throughout 2018, causing the group to slow investment in non-priority areas.

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