Construction output estimates are a short term indicator of construction output by the private sector and public corporations within Great Britain and are produced from a monthly survey of 8,000 businesses in Great Britain. The estimates are produced and published at current prices (including inflationary price effects) and at chained volume estimates (with inflationary effects removed) both seasonally adjusted and non-seasonally adjusted.
Detailed estimates along with a longer run of time series data are available to download in the Output in the Construction Industry, August 2013.
Further details on the newly published monthly seasonally adjusted series and the chained volume measures can be found in the ‘What’s new’ section of the output background notes.
The ‘Definitions and explanations’ section in the background notes of this bulletin includes additional information on items contained in this release.
Construction output is a major component in the production approach to measuring gross domestic product (GDP), accounting for 6.3% of total GDP, based on 2010 prices. Due to the high value of construction in GDP and its stand alone status as a key economic indicator, the construction estimate is widely used by economists and industry specialists as an aid to economic interpretation and forecasting.
According to the third estimate of gross domestic product (GDP), the UK economy grew by an unrevised 0.7% in Q2 2013, following an increase of an upwardly revised 0.4% in the previous quarter. Construction output has been more volatile than these recent movements, rising by 1.9% in Q2 2013 after a decline of 1.3% in Q1 2013. The picture is similarly volatile in the first two months of Q3 2013 with July showing growth of 2.8% while August shows a decrease of 0.1%. Construction estimates can be highly responsive to the economic cycle and have provided some of the largest downward contributions to GDP, despite only accounting for 6.3% of the economy.
Output in the construction industry grew steadily (with the exception of a mild downturn in 2004) from 2000 until early 2008, when a financial market shock affected the UK and global economic growth. The deterioration in economic conditions that followed had a marked effect on the three main industry groupings within the economy, and in particular construction. Between Q1 2008 and Q2 2009, construction output fell by 17.1%, while output in the production and services industries fell by 11.7% and 5.4% respectively.
Quarterly estimates for Q2 2013 show that output in the construction industry remains 14.7% below its pre-downturn peak in Q1 2008, while output is 13.2% lower in the production industry and 0.2% lower in the services industries. Therefore, the construction industry lost output at the fastest rate in 2008/09 and subsequent growth has been the most subdued.
More information on how construction output has fared during economic downturns can be found in the article 'UK Construction Industry downturn in a historic context'.
Comparing August 2013 with July 2013, the volume of construction output has fallen by 0.1% but is 4.0% higher when compared with August 2012.
The month on month data show small falls in both new work and repair & maintenance of 0.1% and 0.2% respectively. New housing continued to show growth, in contrast to the falls seen in the corresponding period 12 months ago.
Comparing the three months June to August with the previous three months March to May, the volume of construction output is estimated to have increased by 2.4%. There was an increase in new work of 3.9%, the highest three monthly growth since the three months April to June 2010.
There was growth in the construction of new housing with both public and private sector housing increasing during the period. These sectors respectively contribute approximately 21% and 79% to the new housing total. Private sector new housing increased by 8.4% three months on three months while the volume of public sector housing increased by 7.2% during the same period. However, the latest monthly growth for public new housing is estimated to have been flat into August in contrast to the 1.6% monthly growth in private new housing construction. More information on construction of new housing can be found in the article 'Growth in new housing construction gains momentum'.
The volume of repair and maintenance is estimated to have fallen by 0.1% during the three months June to August and by 0.2% when comparing August with July. The 0.1% three monthly fall is despite a 3.3% rise in the volume of private sector housing repair and maintenance.
|Construction||Most recent 3 months on a year earlier||Most recent 3 months on 3 months earlier||Most recent month on the same month a year ago||Most recent month on the previous month||Most recent level|
|Total All Work||3.0||2.4||4.0||-0.1||9,388|
|Total All New Work||5.0||3.9||5.5||-0.1||5,835|
|Total Repairs and Maintenance||-0.3||-0.1||1.6||-0.2||3,553|
|All New Work|
|Total All New Work||5.0||3.9||5.5||-0.1||5,835|
|Other New Work|
|Private Sector - Industrial||-5.5||-3.2||1.4||3.9||265|
|Private Sector - Commercial||4.0||2.5||8.4||-0.3||1,839|
|Repairs and Maintenance|
|Total Repairs and Maintenance||-0.3||-0.1||1.6||-0.2||3,553|
Construction estimates are a key component of the output approach to measuring GDP along with the estimates of services, production and agriculture. As an aid to users, the short term releases that directly feed into GDP now include an additional table of GDP components. It is anticipated that this table will inform users of the relationship between the individual components which comprise GDP output. The publication dates and the quarterly growths of the individual GDP components are shown in figure 5.
Table 2 shows the month 2 (August) output figures that will feed into GDP for Q3 2013. Previous quarters are unrevised this month in accordance with the national accounts revisions policy.
Each component of GDP has a weight within GDP based on its value in 2011. Construction has a weight of 63 which means that it is 63 parts of the 1,000 that make up total GDP.
To determine the effect each component has on GDP multiply the component growth by its weight in GDP.
An example using Q2 2013 data:
Construction growth = 1.9
Weight in GDP = 0.063 (63/1000)
Effect on GDP = 1.9 * 0.063 = 0.1197 or 0.1 to 1 decimal point.
Revisions to components and the effect on GDP can be calculated using the same process. As a general rule there are no revisions to GDP when the component revisions are:
IoP = between 0.2 and -0.2
Construction = between 0.7 and -0.7
IoS = 0.0 (all values above or below 0.0 effect GDP due to the high weight of IoS in GDP).
IoP = 0.152*0.3 = 0.0456 or 0.1 to 1 dp
Construction = 0.063*0.8 = 0.0504 or 0.1 to 1 dp
IoS = 0.778*0.1 = 0.0778 or 0.1 to 1 dp
|Publication||Weight in GDP||Release date||Latest period||Most recent quarter on a year earlier||Most recent quarter on the previous quarter||Most recent month on the same month a year ago||Most recent month on the previous month|
|Index of Production||152|
|Index of Services||778|
Figure 6 shows the quarterly path for GDP and its components from Q1 2005. While it is apparent that all the components were severely affected by the economic downturn from 2008 it is clear that the downturn had a more pronounced effect on both production and construction. Production and construction have in fact gone through a second dip. The production dip began in Q4 2010 and output fell to levels lower than those seen through the downturn, while construction fell slightly later, beginning its decline in Q2 2011 and is now at levels originally seen in 2009.
In response to user feedback and in line with the announcement made in the article ‘Improvements to the methods used to compile Output in the Construction Industry statistics’, this statistical bulletin now contains monthly seasonally adjusted chained volume estimates. Due to the potential for confusion when comparing constant price (volume) and chained volume measures, all references to constant price series have been removed from this, and future bulletins. The constant price series have also been removed from the associated time series dataset, although retained in a set of supplementary tables.
From November 2013, ONS plan to stop producing the reference table ' Output in the Construction Industry, Supplementary Tables (439.5 Kb Excel sheet) '. If these data are essential to you please notify ONS at the e-mail address in the 'Contact Us' section.
It should be noted that due to seasonal adjustment taking place on a short span of data points used to interpret the seasonal effects there is potential for increased revisions until the seasonal pattern is established within the time series.
Users should note that a monthly seasonally adjusted chained volume series is not available pre-2010. This is due to monthly data not being available for this period. These data are a requirement for creating previous year’s prices from which chain linked volume measures are created.
About this release
Construction output estimates are a short term indicator of construction output while new orders in the construction industry estimates are a short term indicator of construction contracts for new construction work awarded to main contractors by clients. Both these estimates are by private sector and public corporations within GB. Output estimates are produced and published at current prices (including inflationary price effects) and at chained volume estimates (with inflationary effects removed) both seasonally adjusted and non-seasonally adjusted. Chained volume measures are also described as volume. Construction output is used in the compilation of the output approach to measuring gross domestic product (GDP).
The data published in this release cover construction estimates for Great Britain. Construction output estimates for Northern Ireland can be obtained from the Central Survey Unit.
Statistical bulletins for new orders are produced quarterly and incorporated into the Output in the Construction Industry statistical release. Publication dates in 2013 have been placed on the forward release calendar.
An article describing the improvements made to New Orders and Output in the construction industry was published in ONS’s Economic and Labour Market Review in March 2010. See ‘ Development of construction statistics (135.4 Kb Pdf) ’.
An explanation (115.6 Kb Pdf) of the changes introduced in 2010 and the impact this has had on the published series is available.
Standard revisions to the new orders series include late responses from respondents, revisions to the price indices used to deflate the current prices to constant (2005) prices and due to seasonal adjustment.
Aligning the construction output revision period with National Accounts policy
Construction output is a key component of the production approach to measuring gross domestic product (GDP) and, as such, should be subject to the same data policies that govern the accounts although historically it has not been. National accounts data are subject to a revision policy which determines the periods open for data revisions ensuring that revisions to individual estimates can be shown throughout the accounts. Other major short term indicators such as the Index of Production, UK Trade and the Index of Services already adhere to this policy.
From this publication the construction output time series has assumed the same revision policy as the UK National Accounts.
The UK National Accounts revisions policy (27.9 Kb Pdf) covers all published quarterly and annual series appearing in the National Accounts.
The National Accounts represent a wide array of data on areas as diverse as production, trade, earnings, spending, investment in fixed and financial assets and balance sheets. The nature of the National Accounts is that in principle all the activity is linked, so that a change in one area will have an impact elsewhere and consequently making revisions to one part of the National Accounts may lead to revisions through the system. The main strength of the system is that it allows analysis of the various economic indicators both in isolation and in conjunction with others. The strength of the integrated National Accounts system however may mean less flexibility for taking on revisions to the National Accounts. The National Accounts revisions policy is designed to give users a clear understanding of which periods are open for revision at each data release and why incorporating revisions from a single source is not a simple matter.
The current revision policy for construction output is to revise current price survey data for 13 months and seasonal factors for 5 quarters. While this is still applicable for processing the data the revisions to the time series will not be available to users until the back periods are ‘open’ for revisions within the National Accounts.
Statistical continuous improvement
In December 2012, as part of its Statistical Continuous Improvement programme, ONS published a Review of Sample Design and Estimation Methodology for Construction Output. This report evaluated the sample design and estimation methods used on the Construction Output Survey. The conclusions of the review were that the current sample is performing well and that the current methodology for estimation within the survey produces the smallest standard error.
Use of the data
Output in the Construction Industry estimates are widely used both internally and externally and have been identified by legal requirement and user engagement surveys.
The key users of data from the Output of the Construction Industry dataset are:
United Kingdom National Accounts.
Eurostat, the statistical office of the European Union, in order to comply with statutory legislation on short-term business statistics (STS). Short-term business statistics provide information on the economic development of four major domains: industry, construction, retail trade and other services.
Industry analysts requiring estimates of the construction industry output of Great Britain.
Trade associations making UK and international comparisons and to forecast trends in the construction industry.
Other government departments including; the Department for Business, Innovation and Skills (BIS), HM Treasury (HMT) and the Department for Communities and Local Government (DCLG).
As well as being a key indicator of the performance of construction companies, the results of the survey also contribute to the estimate of the gross domestic product of the UK, contributing approximately 6.3% of GDP.
The ONS Monthly Construction Output Survey measures output from the construction industry in Great Britain. It samples 8,000 businesses, with all businesses employing over 100 people or with an annual turnover of more than £60m receiving a questionnaire by post every month. The results of the survey are deflated using price indices from the Building Cost Information Service (BCIS) of the Royal Institute of Chartered Surveyors (RICS) and then seasonally adjusted using X-12 Arima to derive the published estimates.
Since the 1950s New Orders in Construction data have been collected from a sample survey of businesses; originally monthly and now quarterly. There are some known quality issues with the existing survey data as (a) the coverage of the survey is unknown; and (b) new orders allocated to regions are not always accurately recorded. The New Orders data are now supplied under contract to the ONS by Barbour ABI. Barbour ABI will provide ONS with improved coverage and regional splits of new orders in construction data.
The latest Quality and Methodology report for the Output of the Construction Industry estimates can be found on the ONS website.
In addition to 13 months of survey data revisions, a refinement to the seasonal pattern has caused slight revisions to the seasonally adjusted time series from Q1 2012. This publication shows data revisions for Q3 2013 in line with the national accounts revision policy explained previously.
One indication of the reliability of the key indicators can be obtained by monitoring the size of revisions. Analysis of the previously published quarterly seasonally adjusted constant price series has shown that revisions to construction data are small. Generally these quarterly revisions are less than 1% when compared to the final revised period five quarters after initial publication. This indicates that the published estimates are a reliable snapshot of the output in the industry at the date of publication.
Table 3 records the size and pattern of revisions which have occurred in the chained volume measures over the last two months. Please note that these indicators only report summary measures for revisions. The revised data may be subject to sampling or other sources of error. Details about this revisions material can be found in the document ‘Revisions information in ONS First Release’.
|New work published in this release||New work estimates previously published||New work revisions|
|R&M published in this release||R&M estimates previously published||R&M revisions|
|Total output published in this release||Total Output estimates previously published||Total output revisions|
International construction comparisons are compiled by Eurostat. The estimates produced in this bulletin are included in these comparisons. Further information can be found on the Eurostat web page.
Releases on construction output and employment prior to the transfer to ONS can be found on the BIS website.
Understanding the data
Interpreting the data
When making comparisons it is recommended that users focus on chained volume measures or constant price (volume), seasonally adjusted estimates as these show underlying movements rather than seasonal movements.
Construction output estimates are subject to revision because of:
Late responses to the Construction Output Survey.
Revisions to seasonally adjusted factors which are re-estimated every quarter.
Annual updating of the Inter-Departmental Business Register (IDBR) that forms the basis of the sampling for the Construction Output Survey. This occurs in January and can have an effect on the results published in May.
Definitions and explanations
Definitions of terminology found within the main statistical bulletin are detailed below:
Output is defined as the amount chargeable to customers for building and civil engineering work done in the relevant period excluding VAT. As well as work charged to customers, businesses are asked to include the value of work done on their own initiative on buildings such as dwellings or offices for eventual sale or lease, and of work done by their own operatives on the construction and maintenance of their own premises. The value of goods made by businesses themselves and used in the work is also included.
In all returns, work done by sub-contractors is excluded to avoid double counting, since sub-contractors are also sampled. Output does not include payments made to architects or consultants from other firms – this would also cover engineers and surveyors. It would include wages paid to such people if they were directly employed by the business.
Current price (value) (CP)
Current prices are the actual or estimated recorded monetary value over a defined period. They show the value for each item expressed in terms of the prices of that period.
Constant price (volume) (KP)
A constant price or volume measure is a series of economic data from successive years expressed in real terms by computing the production volume for each year in the prices of a reference year. The resultant time-series of production figures has the effects of price changes removed (that is, monetary inflation or deflation). In other words, from the raw data a series is obtained which reflects only production volume. See also the 'Deflation' section. Constant price series in this bulletin are based on the reference year 2005.
Chained volume measures (CVM)
A chained volume series is a series of data from successive years, put in constant price terms by computing the production volume for each year in the prices of the preceding year, and then chain-linking the data together to obtain a time-series of production figures from which the effects of price changes (i.e., monetary inflation or deflation) have been removed. Further information on chain-linking can be found in the methodological article ‘ Annual chain-linking (58 Kb Pdf) ’.
Seasonal adjustment (SA)
Seasonal adjustment aids interpretation by removing effects associated with the time of the year or the arrangement of the calendar, which could obscure movements of interest.
It is common for the value of a group of financial transactions to be measured in several time periods. The values measured will include both the change in the volume sold and the effect of the change of prices over that year. Deflation is the process whereby the effect of price change is removed from a set of values. The current reference year is 2010 for CVM data and 2005 for KP (volume) data.
Institutional sectors are defined in the System of National Accounts (SNA) glossary as:
Units that are grouped together to form institutional sectors on the basis of their principal functions, behaviour, and objectives.
The resident institutional units that make up the total economy are grouped into five mutually exclusive sectors:
Non-profit institutions serving households.
In the case of non-financial and financial sectors these can be further broken down into public sector, those units either controlled by the state or funded from the public purse and include general government, local authorities, housing associations and nationalised industries and private sector, those units controlled by private individuals or groups and not by the public sector.
Gross domestic product (GDP)
Gross domestic product (GDP) is an integral part of the UK national accounts and provides a measure of the total economic activity in a region.
GDP is often referred to as one of the main 'summary indicators' of economic activity and references to 'growth in the economy' are quoting the growth in GDP during the latest quarter.
Construction estimates are a component of GDP from the output or production approach (GDP(O)) which measures the sum of the value added created through the production of goods and services within the economy (our production or output as an economy). This approach provides the first estimate of GDP and can be used to show how much different industries (for example, agriculture) contribute within the economy.
Housing is generally defined as ‘all buildings that are constructed for residential use’. Within the public sector this classification includes construction items such as local authority housing schemes, hostels (except youth hostels), married quarters for the services and police; old peoples' homes; orphanages and children’s remand homes; and the provision within housing sites of roads and services for gases, water, electricity, sewage and drainage.
Private sector housing includes all privately owned buildings for residential use, such as houses, flats and maisonettes, bungalows, cottages, vicarages, and the provision of services to new developments.
Infrastructure is the generic term for the basic physical and organizational structures and facilities needed for the operation of a society or enterprise. These construction items include buildings, roads, power supplies, etc.
Other new work
Other new work excludes the housing and infrastructure sectors. This classification includes construction items such as factories, warehouses, schools and offices, etc.
Within the public sector, non-housing is classified as the construction of building such as schools and colleges, hospitals, universities, fire stations, prisons and museums. Private sector non-housing is comprised of the private /industrial and private/commercial classifications. Private - industrial is the economic activity concerned with the processing of raw materials and manufacture of goods in factories and includes construction items such as factories and shipyards while private – commercial includes all items not included in the previous categories such as embassies, theatres, retail units, warehouses and garages, etc.
Repairs and maintenance
The repairs and maintenance heading in the construction estimates comprises of housing, infrastructure and other new work. This concerns work which is either repairing something that is broken, or maintaining it to an existing standard. For housing output this includes repairs, maintenance, improvements, house/flat conversions, extensions, alterations and redecoration etc on existing housing. For non-housing this includes repairs, maintenance, redecoration etc on existing buildings/structures, which are not housing, for examples schools, offices, roads, shops.
Table 1 of this bulletin aggregates infrastructure and other new work into non-housing.
Code of Practice for Official Statistics
National Statistics are produced to high professional standards which are set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs and are produced free from any political interference.
Details of the policy governing the release of new data are available from the Media Relations Office.
The Output in the Construction Industry incorporating New Orders in the Construction Industry statistical bulletin and relevant time series datasets are available to download free from the Office for National Statistics website at 9.30 am on the day of publication.
ONS allows a list of agreed officials to have access to data 24 hours before publication, which is available on the Construction release page.
Further information and user feedback
As a user of our statistics, we would welcome feedback on this release, in particular on the content, format and structure. For further information about this release, or to send feedback on our publications, please contact us using the following information.
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Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: firstname.lastname@example.org
These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.
|Stuart Deneen||+44 (0)1633 456344||Office for National Statisticsemail@example.com|