June 2022 construction output has revealed a 1.4% decrease, marking the first since October 2021 following seven consecutive months of growth
Both May and June were affected by the timing of the Jubilee bank holiday, and the move of the May bank holiday, which led to an additional working day in May 2022 and two fewer working days.
The main contributors to the decrease in June 2022 were private new housing and private commercial new work, which decreased 6.1% and 4.5%, respectively.
The level of construction output in June 2022 was 2.9% above the February 2020 pre-coronavirus pandemic level.
Alternatively, repair and maintenance work was 12.6% above the February 2020 level whereas new work was 2.2% below its February 2020 level.
Construction output increased by 2.3% in Q2
Despite the monthly decrease, construction output increased 2.3% in Q2 2022, with increases seen in both new work and repair and maintenance.
Total construction new orders decreased 10.4% in Q2 2022 compared with Q1. This marks the largest quarterly fall in construction new orders since Q4 2020.
The annual rate of construction output price growth was 9.6% in the 12 months to June 2022, which is the strongest annual rate of price growth since records began in 2014.
The growth in the quarter is mainly coming from May 2022 and also because of weakness in Q1, which was partly a result of the storms in February 2022.
Private industrial work saw a strong growth
Private industrial new work saw a strong growth in June, which has come from a rise in warehouses and distribution centres as illustrated in the new orders data for Q2 2022. This is likely to be linked to consumers’ change in shopping habits over the pandemic because of more online spending.
Causes of decline in June
The monthly fall of 1.4% in construction output in June 2022 represents a decrease of £204m in monetary terms compared with May 2022. Five out of the nine sectors saw a decrease.
Private housing new work and private commercial new work were the largest contributors to the monthly decrease in June 2022, decreasing 6.1% and 4.5%.
Strong price growth for certain construction products continued to be an issue
Despite construction output in volume terms having recovered to above its pre-pandemic level since the start of 2022, the gap between value and volume estimates has continued to widen as prices continue to rise sharply.
Prices in the construction industry, as estimated by the Construction Output Price Index (OPI), increased to 9.6% in the 12-month period to June 2022. This was the strongest annual rate of construction output price growth since records began in January 2014.
Both total new work and total repair maintenance recorded their strongest rate of annual price growth in June 2022 since records began of 11.1% and 6.9%, respectively.
Despite the largest quarterly fall in new orders since Q4 2020, new orders are still at a higher level than before the pandemic in Q2 2022. Compared with Q4 2019, which was the last full quarter not affected by the coronavirus pandemic, new orders are now 1.2% higher.
Industry comment
Beard director Mike Hedges commented: “This first decrease in construction output after seven months of consecutive growth aligns with our expectation and we remain cautious for the next 18 months, which may see the sector slow.
“The biggest fall was in new work, but that reduction is probably affected by the decline in the pent-up demand in construction that we saw following the pandemic – as well as by the timing of the Jubilee bank holiday, which led to two fewer working days.
“We also need to remember that tendering activity usually slows at this time of year. But there is also some underlying optimism – the total level of construction output is still 2.9 per cent above the pre-pandemic level and we are working closely with our customers to see through their project plans.
“The continuing high cost of products like concrete and masonry continues to challenge the sector. At Beard, we work closely with our supply chain and customers to ensure that our projects factor in extended lead times.”
