A jump in construction output of 8.6% during the second quarter of 2010, after a fall of 0.7% in the first three months of the year, contributed substantially to second-quarter economic growth of a provisionally estimated 1.1%.
Despite this robust economic growth, the Bank of England’s governor warned that the recovery could be long and painful, and the think-tank, the National Institute of Economic and Social Research, forecast growth of just 1.3% this year. The economy is predicted to expand by 1.7% and 2.2% in 2011 and 2012 respectively, but consumer spending is not expected to reach its pre-recession peak until 2015.
On the nation’s building sites, growth lost momentum in July, according to the Markit/CIPS construction Purchasing Managers’ Index (PMI). Residential building continued to be the strongest sector, while commercial-based construction activity grew at a faster pace than civil engineering. New order intake slowed to its weakest since March.
New orders
Official figures indicate that in the first three months of 2010 the total value of new orders rose by 20%, to a level 30% up on a year earlier. The volume of new orders for commercial projects in the first quarter fell 5% over the previous quarter but was 4% higher than a year before; by value, orders over the two periods expanded by 3% and 1% respectively.
Orders for new private housing rose in value by 27% during the first quarter and by 64% year-on-year. In volume terms private housing orders placed in the first quarter were up 9% compared with the previous three months and by 63% on the same period a year before. The volume of new orders for public-sector housing in the first quarter rose by 17%, and was 81% higher than a year earlier. By value, orders expanded by 73% during the quarter and by 80% annually.
Property prices fell for the first time in a year in July, according to the RICS, which is gloomy about prospects for housebuilding. The number of new home loans approved in June was 4% lower than in May, and 5% below the six-month average.
In manufacturing, where timber finds markets for packaging and pallets, output grew by 1.6% during the second quarter and by a strong 3.8% year-on-year. The manufacturing PMI slipped marginally in July, while remaining close to its post-recession peak, but the CBI reports rising export orders. Meanwhile production of furniture rose 0.9% annually while other wood and wood product output was up 7.2%.
Consumer confidence
A further drop in consumer confidence in July coincided with a CBI survey which indicated a sharp decline in sales volumes among furniture retailers in July, with 47% reporting a downturn. The British Retail Consortium confirms that shoppers shunned big-ticket household products in particular. Official data for July shows that the volume of furniture sales fell by 7.2% annually, while the value of sales was down 4.6%.
Separate figures for the first quarter of 2010 show an annual fall of 0.9% in the volume of household spending on furniture, but in value terms outlays were 4.7% higher than in the first three months of last year.
In the wider picture, the optimism of early summer has given way to a more sober assessment of protracted, sluggish growth ahead.
