UK construction output slides, housebuilding fades further

[LONDON] British construction output unexpectedly fell in January at the sharpest monthly rate since late 2013, dragged down by a worsening decline in housebuilding, official data showed on Friday.

Construction output shrank by 2.6 per cent in January - confounding economists' expectations for a rise of 1.2 per cent - after rising by 0.6 per cent in December, the Office for National Statistics said.

Total new housebuilding dropped by 5.0 per cent on the month, the steepest fall since February last year.

While most signs points to a strong start to the year for Britain's economy, construction output has disappointed.

The ONS revised down its estimate for construction output in the fourth quarter of last year to show a fall of 2.2 per cent.

The figures showed the first year-on-year decrease in construction output in January since May 2013, falling 3.1 per cent.

The ONS linked January's fall to weak mortgage lending and high house prices, as well as skill shortages among builders and tight funding conditions.

There were also sign the weakness will persist. New construction orders in the fourth quarter fell 2.9 per cent from the previous quarter, led by a 6.5 per cent fall in all new housing.

For 2014 as a whole, new housing orders fell 7.1 per cent, a stark contrast with growth of nearly 40 per cent in 2013.

The deterioration of housebuilding will fuel concerns that Britain is building too few new houses to keep up with demand.

Earlier this week a survey of chartered surveyors suggested the shortage of new homes coming to the market was likely to push up already-elevated house prices in the coming years.

Gauges of British house prices have been mixed recently. This week, the monthly RICS survey showed house prices rose more strongly than expected last month, although mortgage lender Halifax reported a slight fall.

Construction makes up about 6 per cent of Britain's economy.

The official data contrast with recent surveys of purchasing managers, which have shown solid growth.

REUTERS