Uk Construction Slump Is Worse Than Any Economist Imagined

[Sancho Panza]

Telegraph 11/10/14

'The UK’s construction industry has suffered a dark August, as output sunk on the previous month, despite a widely held view that the sector would rebound.

Total construction output dropped by 3.9pc on a monthly basis, according to the Office for National Statistics (ONS).

A Bloomberg poll of analysts determined that construction output had risen by 0.5pc in August on the previous month, after the ONS reported no increase in July - since revised up to monthly growth of 1.9pc.

No analyst surveyed had predicted anything but growth. Even the most pessimistic analysts - at CEBR - expected growth of 0.1pc.

“Although the housing market has been softer of late, it will take time for this to feed through to construction activity, and survey data for August remained strong”, said economists at HSBC ahead of the data, who anticipated a rise in line with the consensus forecast.

All types of new work except public housing suffered decreases, the ONS reported, with the total 4.8pc lower.

In the year to August, construction output was 0.3pc lower. Output remains well below its pre-crisis peak, and even further short of its pre-recession trajectory.

The fall in output this August has caught many by surprise, as key gauges of the industry had suggested a return to growth in the month.

Fresh surveys have suggested that the construction industry should enjoy a bumper September, as purchasing managers’ index figures indicate that the pace of growth accelerated in the month.

Recent adjustments to the ONS’ national accounts have frustrated some analysts. “The revisions have made the job of forecasting upcoming monthly changes in the components of GDP more challenging”, said Victoria Clarke, of Investec.

Construction accounts for 6.4pc of total GDP. The ONS has now updated its quarterly construction series, but not the monthly level.

“The new quarterly numbers happen to show somewhat different quarterly swings to the pre-revision history, suggesting our ‘base month’ readings on which we assess month-to-month moves going forward, will also have shifted”, said Ms Clarke.

Chris Williamson, chief economist of Markit, called into question the veracity of the statistics. "We suspect, however, that this is a wholly inaccurate representation of the sector’s health, and that construction in fact continues to boom", he said.

“We question the value of the official construction data due to the scale of revisions that occur after data are first release. The signals about the health of the sector and the economy as a whole can be utterly misleading as a result", Mr Williamson added.'

[Ash4781]

The reported revision to July does seem rather large.

The ONS has had a few duff stats. At one poiny the bor started calculating their own gdp estimates. There was a recent declassification of a national statistic posted in here somewhere.

Edited October 11, 2014 by Ash4781

[billybong]

Chris Williamson, chief economist of Markit, called into question the veracity of the statistics. "We suspect, however, that this is a wholly inaccurate representation of the sector’s health, and that construction in fact continues to boom", he said.

“We question the value of the official construction data due to the scale of revisions that occur after data are first release. The signals about the health of the sector and the economy as a whole can be utterly misleading as a result", Mr Williamson added.'

So when the statistics show boom they're ok but when they don't they're faulty?

So if what he says is correct then even the chief economist of Markit accepts that a lot of ONS statistics are rubbish. Likely that applies to a lot of Markit's stats as well.

[Steppenpig]

I wonder why they don't just add in some imputed construction, equivalent to what it would be if they hadn't f**ked up the economy.

Edited October 11, 2014 by Steppenpig

[zugzwang]

Comparative statics vs nonlinear dynamics. Economists use the first, scientists the second. Both are subject to error and uncertainty but only the latter generates meaningful results.