Construction industry is now in recession… allegedly

The Office for National Statistics has published new figures that show the construction industry is now in recession, despite all industry surveys strongly indicating that the industry is in its best health for years.

Lies, damned lies and statistics

Latest ONS statistical bulletin estimates that output in the construction industry decreased 1.1% in the first quarter of 2015 compared with the previous quarter (Q4 2014).

Between Q1 2014 and Q1 2015 output is estimated to have decreased by 0.3% – the first year-on-year fall since Q2 2013.

ONS says that downward pressure on the quarter came from all new work, which fell by 1.7%, the largest quarter-on-quarter fall since Q1 2013, when it fell by 2.0%. Most of the Q1 2015 decline can be attributed to a large fall in January, ONS says.

March saw the industry bounce back somewhat, with the ONS reckoning output increased by 3.9% compared with February 2015. On the year, output in the construction industry increased by 1.6% in March 2015 compared with March 2014.

However, the Construction Products Association (CPA) said that the official data from the ONS contradicted a growing body of recent evidence. Earlier this week the industry’s own Construction Trade Survey, from five contractors’ trade associations and the CPA itself, showed that the industry had just notched up its eighth consecutive quarter of growth.

Other industry surveys show that crushed rock and sand & gravel sales volumes rose by 2.2% and 3.6% respectively in Q1 2015 compared to Q4 2014, while ready-mixed concrete and asphalt sales were 1.3% and 1.2% up.

Several independent organisations, including Experian and Markit/CIPS, have similarly reported growth in construction activity.

While economists famously rarely agree on anything, the discrepancy between the ONS and the construction industry’s own economists suggests that someone somewhere has got something seriously wrong.

The CPA said that it was now working with the ONS to resolve what it considers to be discrepancies with the way the official data are produced.