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Economic recovery remains fragile

CONSTRUCTION output has suffered a surprise fall in May as new work on private-sector housing dried up, suggesting the country's rapid economic growth over the past year might have lost momentum.

Output dropped by 1.1 per cent in May after rising by 1.2 per cent in April, causing the annual rate of growth to slow to a six-month low of 3.5 per cent, according to the Office for National Statistics (ONS). The monthly fall was due to a drop in new private commercial work as well as public projects, with new private housing work flat on the month.

While monthly construction figures are notoriously volatile these figures, taken with the unexpected 0.7 per cent fall in industrial production data and the 1.3 per cent fall in manufacturing output this week from the ONS, bring to an end an extended run of positive news about the economy.

IHS Global Insight chief UK economist Howard Archer said this recent data made it highly questionablethat first quarter GDP growth of 0.8 per cent would be matched in the second quarter of the year.

Markit chief economist Chris Williamson added: "The weakness of these data alongside disappointing manufacturing output data for May suggest policymakers will be encouraged to err on the side of caution about hiking interest rates too early in what looks to be a still-fragile recovery."

The quarterly measure showed construction output fell 0.8 per cent in the three months to May, its biggest fall since the three months to October 2012. The last time private-sector housing was so weak - excluding a weather-related hit in February - was last November.

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