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, March and Q1 2014 dataset.
The ‘Definitions and explanations’ section in the background notes of this bulletin includes additional information on items contained in this release.
Construction output estimates for January and February 2014 are thought to be minimally affected by the flooding and storms which produced localised damage and disruption in parts of the UK. ONS maintains a list of candidate special events in the Special Events Calendar. ONS reviewed the effects of the weather in January and February 2014 in line with the ONS Special Events policy and decided that it did not constitute a statistical special event. More information can be found in the report on Adverse weather conditions in December 2013 and January and February 2014 (49.9 Kb Pdf) published 27 March 2014.
It should be noted that due to seasonal adjustment taking place on a short span of data points used to interpret the seasonal effects (51 months), there is potential for increased revisions until the seasonal pattern is more established within the time series. The seasonal pattern is generally established after 60 months in a monthly time series.
Construction output is a component in the production approach to measuring gross domestic product (GDP), accounting for 6.3% of total GDP, based on 2010 weights. 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.
Compared to the previous month, construction output fell by 1.0% in March 2014 following a fall of 2.0% in February 2014. The fall in construction output in March was broad based with all new work falling by 1.1% and all repairs & maintenance falling by 0.7%. However, output over the quarter as a whole still rose by 0.6% and on an annual basis growth was even stronger at 5.4%.
The latest data highlights a growing divergence in the performance of private new housing construction relative to total construction output. Despite only accounting for approximately 15% of total construction in 2013, new private housing rose by 23% on the year and has driven the recent recovery in total construction.
Figure 1 compares private new housing in the previous three downturns with the current downturn. Historically, Figure 1 shows that the fall in private new housing was deepest in the 2008-09 economic downturn, experiencing a fall of over 40%. The recovery has been subdued in general and output is now 12.3% below its pre downturn peak 24 quarters after the onset of the downturn. However growth has picked up sharply throughout 2013 and in Q1 2014.
The recent pickup in private housing follows the March Bank of England Agents’ Summary that cites the housing market as a key driver of the recovery in construction, with wider economic variables also showing a recovery in the housing market. The Bank of England Credit Conditions Survey for the household sector showed that there was a slight increase in availability of secured credit and that demand for secured lending for house purchase had increased in Q1 2014. The ONS house price index showed growth of 9.1% for the UK in the year to February 2014.
Comparing Q1 2014 with Q4 2013 (Figure 2), the output of the construction industry increased by 0.6% and by 5.4% when compared with Q1 2013. Q1 2014 compared with Q4 2013 was somewhat influenced by the weak data in November 2013 which dragged down the Q4 2013 data. In Q1 2014 only January showed positive growth with both February and March falling when compared with the previous month.
Since the lowest point of the data series during the economic downturn in Q2 2009 (£26.8 billion), the volume of construction output had recovered 6.3% up to Q1 2014 (£28.5 billion).
Figure 3 shows the path of the main components of construction output since Q1 2007. It shows that the 6.3% increase in construction output was mainly attributable to the 9.8% increase in new work which increased 8.5 index points, rather than the more modest increase of 0.6% seen in the repair and maintenance estimates.
Looking more closely at the new work data there was a clear wedge between the new housing estimates and the other work series (Figure 4) since Q1 2013. Comparing the two time series since Q2 2009 new housing increased 56.8% while other work fell 4.9% over the same period.
Overlying the components against total construction (Figure 5) we can see that the increase in total construction since Q3 2013 was almost solely attributable to the sharp increase in the output of new housing.
By removing the new housing element of construction from the total construction time series we can see the clear drag on construction output caused by new housing through 2009 (Figure 6). This effect was reversed in 2013/14 when new housing was again a major contributor to the industry growth which was last seen in 2007. The effect of removing the new housing element from the Q1 2014 estimates would have seen construction output fall 2.2% when compared with Q4 2013.
The monthly estimate of construction output show that the series fell for the second consecutive month in the quarter (Figure 7). March 2014 is estimated to be 1.0% (£90 million) lower when compared with February 2014 but 6.4% (£560 million) higher when compared with March 2013.
Both new work and repair & maintenance fell in March 2014 when compared with February 2014 with new work decreased by 1.1% and repair & maintenance by 0.7%. The monthly series emulate the quarterly series in showing buoyant long term growth, with new work increasing by 6.7% and repair & maintenance increasing by 5.8%, when compared with March 2013.
|New Housing||Other New Work||All|
|Date||Jan 2013||Jan 2010||Jan 2010||Dec 2010||Mar 2014||Jul 2011||Sept 2012||Jun 2012|
|Date||Mar 2014||Jan 2014||Jan 2014||Dec 2011||Feb 2011||Aug 2010||Sep 2011||Jun 2011|
|Percentage change from lowest volume||42.0||44.2||43.6||3.8||0.0||18.2||12.4||6.8|
|Percentage change from highest volume||0.0||-5.7||-3.6||-24.8||-40.1||-20.2||-17.2||-12.3|
|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||5.4||0.6||6.4||-1.0||9,387|
|Total All New Work||6.0||0.9||6.7||-1.1||5,810|
|Total Repair & Maintenance||4.5||0.2||5.8||-0.7||3,577|
|All New Work|
|Total All New Work||6.0||0.9||6.7||-1.1||5,810|
|Other New Work|
|Private Sector - Industrial||-10.6||6.2||1.8||6.5||285|
|Private Sector - Commercial||1.3||1.6||3.1||-1.1||1,759|
|Repair & Maintenance|
|Total Repair & Maintenance||4.5||0.2||5.8||-0.7||3,577|
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 table 3.
Each component of GDP has a weight within GDP based on its value in 2010. Construction currently 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 place (dp).
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 0.3 and -0.3 percentage points
Construction = between 0.7 and -0.7 percentage points
IoS = 0.0 percentage points (all values above or below 0.0 effect GDP due to the high weight of IoS in GDP).
IoP = 0.152*0.4 = 0.0608 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
Figure 8 shows the individual components of GDP and their contribution to the latest GDP growth published on the 29 April 2014 while table 3 shows the latest monthly and revised quarterly output figures that fed into the preliminary estimate of GDP release for Q1 2014.
|Publication||Weight in GDP||Publication date||Latest periods||Most recent period on a year earlier||Most recent period on the previous period|
|29 Apr||Q1 2014||3.1||0.8|
|28 Mar||Q4 2013||2.7||0.7|
|Index of Production||152|
|9 May||Q1 2014||2.5||0.7†|
|7 Feb||Q4 2013||2.2||0.5|
|9 May||Q1 2014||5.4||0.6†|
|14 Feb||Q4 2013||3.4||-0.2|
|Index of Services||778|
|29 Apr||Q1 2014||3.0||0.9|
|28 Mar||Q4 2013||2.5||0.8|
|29 Apr||Q1 2014||1.8||-0.7|
|28 Mar||Q4 2013||-2.4||0.2|
† Revised since preliminary estimate
Figure 9 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 contraction. The production fall 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 reaching the low point of this second downturn in Q3 of 2012. Since this low point construction output has continued to improve slowly and increased by 6.3% up to, and including, Q1 2014 with a rate of improvement in 2013 sharper than that recorded for either the production or services industries.
In April 2014 the United Kingdom Statistics Authority (UKSA) published an assessment of the Construction Output and New Orders statistics to measure its compliance with the Code of Practice for Official Statistics. This release and associated dataset now contain additional information for users to meet some of the requirements and suggestions of the assessment.
Due to the differences in the growth calculation between variables within the construction output dataset, and to prevent confusion to users, all growths have been removed from tables 1a to 2b. The period on period and period on period 12 months ago growths are now only published as a time series in tables 3a and 3b.
The Office for National Statistics (ONS) will be hosting two seminars on 19th June 2014 at the Queen Elizabeth II Conference Centre, London to engage with users regarding potential changes to GDP estimates. The two seminars are entitled; Improvements to the Output Approach to GDP and Construction Price Indices. To facilitate a good discussion at these seminars ONS welcomes attendance from a broad range of users.
About this release
Construction output estimates are a short term indicator of construction output by private sector and public corporations within Great Britain. 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.
This release conforms to the standard National Accounts revision policy (27.8 Kb Pdf) , which can be found on the National Statistics website. In line with this, the construction output release for March 2014 has a revision period back to January 2014.
Figures for the most recent months are provisional and subject to revision in light of (a) late responses to the Monthly Business Survey MBS and (b) revisions to seasonal adjustment factors which are re-estimated every period.
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.
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 for construction output have been removed from this, and future bulletins.
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), Department for Communities and Local Government (DCLG) and the Office for Budget Responsibility (OBR).
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.
The latest Quality and Methodology report (161.5 Kb Pdf) for the Output of the Construction Industry estimates can be found on the ONS website.
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 percentage point when compared with 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.
The size and pattern of revisions which have occurred in the chained volume measures in the open period for revisions can be found in the new revision triangles on the construction web page. 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’.
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. The seasonal pattern is generally established after 60 months in a monthly time series.
Please 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.
The data tables that accompany this statistical release contain revision triangles to inform users of the scale of the revisions to published data.
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.
The user engagement section of the ONS website contains results of the survey held in April 2011 regarding users' satisfaction and use of the new orders and construction output surveys.
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 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’.
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.
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-financial corporations.
• Financial corporations.
• General government.
• 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 organisational 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.
Repair and maintenance
The repair 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 2 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 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
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