Construction sector slowdown adds to coalition’s woes

constructionHousebuilders and big construction firms suffered a downturn in business in the third quarter of the year as the poor state of the economy hit new orders for homes and halted expansion of infrastructure projects, according to an official survey of the sector.

Total construction output fell 0.2% from the second quarter and dropped 1% compared to the same period last year, the Office for National Statistics said.

Worryingly for the government, new work in the period fell by 1.8% compared with the same quarter last year, leading to fears that the construction sector will lead the rest of the economy into recession over the winter.

A plateau in the value of infrastructure projects will also concern ministers. The volume of new infrastructure building work in the third quarter of 2011 was 0.3% lower compared with the previous quarter, though it remained 13.4% ahead of the same quarter in 2010.

Prime minister David Cameron said earlier this week that a rise in infrastructure spending, alongside investments in small businesses, would be the centrepiece of the government’s strategy.

In the industrial sector, activity suffered a severe slump, down 8.4% on the previous quarter and 26.5% lower compared with the same period in 2010.

The volume of new private housing work declined by 2.5% compared with the previous quarter, though output was 0.7% higher on last year. Public housing declined 8.2% on the previous quarter.

Only a rise in the value of maintenance contracts and a slight increase in output in the commercial building sector saved the industry from falling back further.

There was better news for the government in figures for inflation suffered by manufacturers, who enjoyed a slowdown in the recent spectacular rise in producer prices.

Input price rises dropped to an annual rate of 14.1%, the lowest since last December, giving a bit of breathing space to firms that saw the prices of their own goods rise at an unchanged 5.7%. Between September and October the total input price index fell 0.8%, the ONS said.

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