Construction goes from zero to hero
UK GDP is estimated to have grown by 0.4% in May after showing no growth in April, according to the latest ONS figures.
The growth in monthly GDP was driven by a 0.3% increase in service output, a 0.2% rise in production output and a 1.9% increase in construction output.
In the three months to May, GDP is estimated to have grown by 0.9% compared with the three months to February.
Monthly construction output is estimated to have grown by 1.9% in volume terms in May 2024; following a fall of 1.1% in April 2024.
Breaking down the figures, the increase in monthly output came from increases in both new work (2.7%), and repair and maintenance (0.8%); anecdotal evidence from survey returns noted that warmer weather contributed to increased output in May.
At the sector level, eight out of the nine sectors saw growth in May 2024, the main contributors to the monthly increase were a 2.8% increase in total new housing, with both private and public new housing increasing on the month, infrastructure new work, which rose by 3.5%, and non-housing repair and maintenance, which grew by 2.1% on the month.
Construction output is estimated to have fallen by 0.7% in the three months to May 2024; this came from a decrease in new work of 0.9%, and repair and maintenance, which fell by 0.3%.
Michael Wynne, director of the sustainable housebuilder Q New Homes, commented: “Construction has gone from zero to hero in the space of just one month, moving from the being the weakest to the strongest sector of the economy in May.
“The jump in output can only be partly explained by the contrast between May’s good weather – which was officially the warmest on record – and the rain soaked April, which delayed work on many building sites.
“Sentiment also picked up and cost inflation remained modest, with the surges in material costs seen last year now mostly a painful memory.
“Levels of new housebuilding spiked by 2.8% during the month, and while this is very welcome it’s worth remembering that this figure is flattered by comparison to the low levels seen during the first part of the year.
“For all its strength, there’s more than a touch of the rear-view mirror about this ONS data – much of which was recorded in the weeks running up to Rishi Sunak’s surprise election announcement.
“A better test of the market’s health will come over the coming month, as housebuilders digest the reforms announced by the incoming Government and we anxiously await the Bank of England’s next interest rate decision at the start of August.
“The start of an interest rate cut cycle should unleash a surge of pent-up demand from both developers and homebuyers – which will determine whether today’s positive data is a blip or a bounceback.”
Beard Construction finance director Fraser Johns said: “Although more recent PMI data shows just how volatile the sector is, the news that both private and public new housing is leading this charge will be welcome to the many that rely on this sector. It is a real example of the resilience we continue to see from firms across UK construction.”
He added: “Until we see output and new orders increasing consistently month-on-month, we shouldn’t take anything for granted though. With the election now settled, the hope is we can all pick back up and continue to build momentum during the second half of the year. As we see borrowing conditions improve, with a potential base rate cut in the near future, this will certainly enable more clients to push ahead with plans.”
