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, September and Q3 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.
The first estimate of Q3 2013 GDP showed that the UK economy grew by 0.8 per cent in quarter three and by 1.5 per cent when compared to Q3 2012. The stronger position of the economy overall is also reflected in the construction sector, which experienced two consecutive quarters of growth. The construction sector grew 1.7 per cent in Q3 2013 after growing 1.9 per cent in Q2 2013. The consistent growth in construction has led to 4.1 per cent growth year-on-year compared to 1.9 per cent for the services and -0.2 per cent for the production industries. 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 per cent of the economy. However in Q3 2013, the strength of construction contributed 0.1 percentage points to GDP growth.
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 Q3 2013 show that output in the construction industry remains 13.3% below its pre-downturn peak in Q1 2008.
More information on how construction output has fared during economic downturns can be found in the article ‘UK Construction Industry downturn in an historic context’.
Comparing September 2013, with the same month 12 months ago, the output of construction increased by 5.8% but fell 0.9% when compared with August 2013. The month on month data above show small falls in both sub-sectors of construction output where new work fell 0.6% and repairs and maintenance fell 1.3% contributing to a fall in total output in September 2013.
The volatility in the All Work estimates was primarily due to fluctuations in the New Work series. The contrast between New Work and Repairs and Maintenance can be seen in Figures 3 and 4 below.
All new work fell 0.6% in September 2013 when compared with August 2013 after two months of positive growth. After falling 18% from its peak of £6,500 million in August 2010 new work has since regained 8% to now stand at £5,800 million.
Comparing the third quarter of 2013 ( July to September), with the previous quarter (April to June), the volume of construction output is estimated to have increased by 1.7% (see Figure 1). There was an increase in new work of 3.1%, the highest quarterly growth since Q2 (April to June) 2010. During the quarter repair and maintenance remained relatively subdued showing a 0.6% decrease after two consecutive quarters of positive growth.
There was growth in the construction of new housing with both public and private sector housing increasing quarter on quarter. Private sector new housing increased by 3.9%, while the volume of public sector housing showed a more modest increase of 0.5% during the same period. The estimated 3.9% increase in private new housing, to £4,350 million, is the highest volume of private new housing recorded since Q2 2008.
Estimated to be £5,500 million, the volume of new housing is now 42.1% above its lowest level of £3,800 million seen during Q3 of 2009.
The share of new housing in total construction output is now 19.4%, 2.4 percentage points below its peak of 21.8% in Q3 2006 but 5.1 percentage points higher than its economic downturn low point of 14.3% in Q3 2009.
|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||4.1||1.7||5.8||-0.9||9,315|
|Total All New Work||6.2||3.1||7.2||-0.6||5,795|
|Total Repairs and Maintenance||0.8||-0.6||3.6||-1.3||3,520|
|All New Work|
|Total All New Work||4.1||1.7||5.8||-0.9||9,315|
|Other New Work|
|Private Sector - Industrial||-12.1||-6.4||-18.6||-7.1||235|
|Private Sector - Commercial||12.5||7.0||18.9||2.2||1,919|
|Repairs and Maintenance|
|Total Repairs and Maintenance||0.8||-0.6||3.6||-1.3||3,520|
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 3 (September) output figures that fed 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 0.3 and -0.3
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*0.4 = 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
|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|
The Preliminary Estimate of Gross Domestic Product (GDP) published on 25 October 2013 contained a forecast for quarterly construction output of 2.5%. This estimate has been revised within this release based on updated survey responses and is now estimated to be 1.7%, a downward revision of 0.8 percentage points. This downward revision has no effect on the preliminary estimate of GDP growth to 1 decimal place. Construction currently accounts for 6.3% of GDP.
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. In line with the announcement made in previous bulletins the constant price series have also been removed from the associated time series dataset that accompanies this 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.
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 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.
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 (27.8 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.
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.
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 (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.
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
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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|