Disappointing construction figures have left the Coalition parties facing a pre-election growth slowdown when the first quarter’s GDP figures are released just nine days before Britain goes to the polls.
Output from Britain’s builders fell 0.9 per cent in February, said the Office for National Statistics (ONS) – a big miss on the 2 per cent growth that analysts had expected.
Economists said the data – combined with weak industrial production in February and disappointing trade figures earlier this month – means overall GDP growth is likely to have slowed in the first quarter when the ONS reports its preliminary estimate on 28 April, making it more difficult for the Conservatives and Liberal Democrats 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 at Scotiabank. The economy grew by 2.8 per cent over 2014, the fastest rate in the advanced world, and by a healthy 0.6 per cent in the final quarter of the year. Mr Clarke predicted that growth in the first quarter will have decelerated to just 0.4 per cent.
The story of falling construction output is at odds with survey evidence from the sector. The Markit/Cips purchasing managers’ index for construction continued to strengthen in February, hitting 60.1, with any figure above 50 signalling expansion – although there was a slippage to 57.8 in March.
Samuel Tombs at the consultancy 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 economy. “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 the recovery is poised to gain rather than lose pace this year”.
The ONS reported that manufacturing grew 0.4 per cent in February, partially reversing a 0.6 per cent fall in January. Overall industrial production – which includes output from beleaguered North Sea oil companies – inched up by just 0.1 per cent.
Earlier this week, official figures showed that the value of UK goods exports sank to its lowest level in over four years in February, while the trade deficit hit a seven-month high. Net trade gave a big boost to overall GDP growth in the final quarter of 2014, but analysts now expect it to be a drag on output in the first quarter.
Despite the poor official output figures for February, the National Institute of Economic and Social Research forecast yesterday that GDP will have grown by 0.6 per cent in the first quarter.