-Bank of England
Output in the British construction sector, which accounts for 6% of the UK economy, unexpectedly declined at the beginning of the year, due to weak activity in the housing sector. Construction output fell by 2.6% in January, against economists' expectations for a 1.2% rise and following the 0.6% gain in December, the Office for National Statistics reported. Measured on year-over-year basis, construction output declined 3.1% after the 5.3% growth in December, recording the first annual decline since May 2013, when it dropped 2.8%. Total new housebuilding fell by 5.0% on the month, the steepest decline since February last year, and dragging the annual rate down to 0.8%. On top of that, there were also signs that the weakness will persist. New construction orders in the final quarter of 2014 dropped 2.9% from the previous three-month period, led by a 6.5% decline in all new housing. The deterioration of housebuilding will raise concerns of a limited supply of new houses, which will not be able to keep up with demand. A survey of chartered surveyors suggested the shortage of new homes coming to the market was likely to push up house prices in the coming years.
The ONS also revised downward the whole fourth-quarter output in construction by one percentage point to a 2.2% drop, but highlighted that the revision does not alter the total GDP growth in the fourth quarter. The final estimate of Q4 GDP is due later in March.
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