Election 2015: Building blow gives George Osborne a polls headacheComments Off on Election 2015: Building blow gives George Osborne a polls headache
Output from Britain’s builders fell 0.9% in February according to the Office for National Statistics, a big miss from the 2% growth City analysts had expected.
Economists said the figures — combined with flat-lining industrial production in February and disappointing trade figures earlier this week — meant overall GDP growth is likely to have slowed in the first quarter when the ONS reports its preliminary estimate on April 28, making it more difficult for Osborne and his Liberal Democrat colleagues to gain credit from voters for delivering an accelerating recovery.
“This is not going to make pleasant reading for the Coalition Government in the final days of the election campaign,” said Alan Clarke of Scotiabank.
The economy expanded by 2.8% over 2014, the fastest growth rate in the advanced world and by a healthy 0.6% during the final quarter of the year.
Clarke predicted growth in the first quarter would decelerate to just 0.4%. Sterling fell more than half a cent to $1.4675, close to a five-year low, in the wake of the data as traders pushed back their estimates of the next interest-rate hike from the Bank of England.
Falling construction output is at odds with survey evidence from the sector, which points to continued, robust activity from builders.
The Markit/CIPS Purchasing Managers’ Index for construction continued to strengthen in February, hitting 60.1, with any figure above 50 signalling expansion, although it slipped to 57.8 in March.
Samuel Tombs of Capital Economics said that although the first-quarter ONS growth figures were likely to be “disappointingly weak” there was still decent, underlying momentum in the UK’s economic recovery thanks to cheaper energy and falling borrowing costs.
“We doubt the recovery is beginning to hit the buffers,” he said. “The stimulus provided to the non-oil sector from lower crude prices, cheaper credit and somewhat stronger demand in the eurozone all suggest that the recovery is poised to gain rather than lose pace this year.”
The ONS reported that manufacturing grew by 0.4% in February, partially reversing a 0.6% fall in January. Overall industrial production — which includes output from beleaguered North Sea oil companies — inched up by just 0.1%.
Earlier this week official figures showed the value of UK goods exports sank to its lowest level in more than four years in February and the trade deficit hit a seven-month high.