Key Statistics: 12 Aug 2014

Construction

• Output in the Construction Industry was flat in the second quarter of this year compared to the first quarter, according to seasonally adjusted estimates from the ONS. Underlying this figure was a 0.4% fall in new work output, with declines registered in infrastructure, commercial and public non-residential work. The industrial sector was the star performer, rising 9.6% on just three months earlier, though the public and private housing sectors also continued to expand at a healthy pace. Declining new build output was offset by a 0.6% rise in repair and maintenance (R&M), due entirely to a healthy 3.1% expansion in non-housing work whereas housing repairs fell back by 2%. On an annual basis the picture is still one of growth far above the rate of the wider economy, with output up by 4.8% on the second quarter of last year underpinned by improvements in both new and R&M work.
• The Glenigan Index, which measures the value of all UK construction projects starting on site worth between £250,000 and £100m, was 10% higher than a year ago in the three months to July, continuing a stable growth rate of around 12% seen since the turn of the year. Residential starts rose by 4%, the slowest pace since April 2013 last year due to declining social housing work; private housing maintained its growth trend with starts expanding by 16% on a year earlier. The industrial, office and utilities sectors have seen the fastest rates of expansion throughout 2014 and in the latest three months were all up by more than 40% compared to a year earlier. The Index measures the value of all UK construction projects starting on site worth between £250,000 and £100m.
• The latest forecast from the Construction Products Association has been revised up from an original forecast of 3.4% at the beginning of this year and the CPA now expects growth in output this year of 4.7%.
• July’s Markit/CIPS Construction PMI recorded an index value of 62.4, down only slightly from June’s strong value of 62.6 and representing one of the fastest rates of expansion in activity since mid-2007. The rate of job creation increased even further to beat last month’s survey record, the authors of the survey noted that some firms are taking on more direct staff as a response to falling levels of sub-contractor availability and rapid rises in rates charged by sub-contractors. This suggests the industry is now running at or near full capacity, also evidenced by rising delivery times and costs for materials. 

Economy

• The latest KPMG/REC report on jobs found strong growth in hiring in July across the UK, with permanent placements rising at their fastest rate for five months. However this coincided with a record fall in numbers of available candidates, pushing up salaries at a rapid pace for the second consecutive month. While the implications for wages and employment are positive, the difficulty finding candidates is more of a concern and suggests the UK is facing a skills mismatch given that the UK unemployment rate of 6.5% is still 1 to 1.5 percentage points above pre-recession norms. 
• Overall output of the UK’s production industries in the second quarter was 0.3% higher than the previous three months, according to the ONS’ Index of Production. This was the slowest rate of increase since October last year and falls well below first quarter growth of 0.7%. Output from manufacturing which makes up two thirds of UK industrial production rose by 0.2% on the same measure, the slowest expansion since May last year. July’s Markit/CIPS Manufacturing PMI suggested that manufacturing growth may cool in the second half of the year, though improving orders and increased hiring suggest that expansion will be maintained.