Public spending in decline

The figures, revealed this week, show that public spending has fallen during the two consecutive quarters to the end of Q1 2005.

This led to an ease in growth for the sector. Construction output only rose in line with inflation (0.6%) for the first quarter – a considerably slacker pace than the 1.2 % rise in the second half of 2004.

The RICS said, however, that taken together, the past two quarters showed that “growth in the industry is still being sustained above its long run average”.

It also highlighted a softening in construction annual wage inflation, from a four-year peak of 6.3% in September 2004 to 4.3% in the three months to February. In April, it fell more dramatically in relative terms, to below that of national average wage rises. The report said: “Some momentum seems to have been lost in the labour market, with vacancies in decline, though levels are similar to the average recorded since mid 2001.”

Some momentum seems to have been lost in the labour market, with vacancies in decline

RICS UK Ecomomic Brief

The RICS cited DTI output figures, which reveal a rebound in commercial construction in 2004 led by the office and leisure sectors, marking a full recovery from the 8% decline in output around the period of the Iraq war.

Retail construction, by contrast, has slowed from being the best performing sector in 2001 to an annual output of 3.4% in 2004.

Michael Ankers, chief executive of the Construction Products Association, this week underlined the importance of government spending, which he said drove construction growth through investment in schools, health facilities and social housing.