New orders indicate cautious optimism for construction

Published:  04 March, 2013

Construction new orders for the final quarter of 2012, released recently by the ONS, rose three percent compared to the third quarter and were 11 percent higher than the same quarter one year earlier. 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.

Commenting on the ONS figures, Milja Keijonen, economist at the Construction Products Association said: "Output in construction fell eight percent 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 percent 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 percent higher in Q4 than in Q3 and were 14 percent higher than one year ago. Despite this, commercial new orders remain 64 percent 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 percent compared to the previous quarter, 13 percent compared to a year ago and were 29 percent 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 percent to GDP, even without taking account of any wider benefits."

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