Today’s GDP figures will come as unwelcome news to the Government. The data suggest the UK again is in a technical recession, falling by an unexpected 0.2% in the first quarter.
A large factor in this decline in growth was down to construction.
The GDP data for construction suggest the industry saw a 3% decline in the first quarter of this year. This follows a fall of 0.2% in the final quarter of last year and technically puts construction into recession.
This was very much expected, as previous blogs will show. The latest forecasts see construction shrinking this year and, while views vary, they paint a picture of fragility for next year.
But these are preliminary estimates of GDP and the gloominess in today’s construction data is likely to prove overdone. The figures will be revised and, on past performance, that is likely to be upward.
The construction data within the figures are partial, based on January and February data with estimates made from early returns on the March data.
Clearly they do not make for pretty reading.
We can’t see from the GDP data what has thrown construction so deep into the mire, but the construction output data produced by the Office for National Statistics points firmly towards a sharpening decline in public sector work.
But some of the sting may be taken out later as more data comes in.
Recent revisions suggest that the latest quarter will be revised upward. These revisions are in large part down to new data coming in. The ONS has to make estimates for the missing data and as new data comes in it “replaces” the estimated data.
ONS is currently feathering the system it uses so that the spread of upward revisions and downward revisions is more balanced. This will take time.
Taking recent revisions the record suggests that the upward revision to a quarter may be more than 1%.
There are of course other revisions that can be and are made, such as to deflators used to account for inflation and to seasonal adjustments.
So what we see today is far from the finished data. And, on past record, it seems what we see today is a less flattering picture of the performance of construction than will be revealed in later iterations of the ONS data.
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