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De-constructing the recovery

Stephanie Flanders | 17:16 UK time, Wednesday, 8 December 2010

Is there anything fishy about Britain's recent GDP numbers? At least one economist thinks there might be. To be precise, he thinks there might be a problem with the figures for the construction sector, which has accounted for an unusually high share of Britain's recent growth.

I hesitate to get into this, having got embroiled in a similar debate about Britain's official output data this time last year (see my post Small difference: Britain's third-quarter GDP). You'll remember, at that time, many economists thought the economy was stronger than the official numbers implied. The numbers for the third quarter were considered especially dubious. Everyone was expecting the numbers to show positive growth - instead they showed the economy continuing to shrink.

At that time, Danny Gabay, of Fathom Consulting, was one of the few economists prepared to stand up for the ONS. The preliminary GDP data weren't perfect, he said - but they were better than anything else out there. Since then, the official estimate for growth in those three months has jumped around a bit, but the official story is still that the economy shrank by 0.3% in the third quarter of 2009. The first estimate was of a decline of 0.4%.

Perhaps the numbers will be revised up sharply in a year or so, as the critics suggest. The point is that Gabay is not usually one to knock the ONS. But the construction figures for the past six months have him a bit concerned. If he's right, that would suggest the recovery has not been quite as strong as we thought. Construction has accounted for 40% of the UK's economic growth in the past two quarters, even though it accounts for just 6% of the economy.

The figures show real construction output has been growing at an annualised rate of 27% since the beginning of April. A number of explanations have been offered for this: for example, companies had to catch up on the ground lost due to bad weather in the first quarter. Some have also pointed to a flurry of public construction projects in the months leading up to the election.

But we're not just talking catch-up. I'm not sure public investment can explain it either. After all, the figures show the construction sector making up all of the ground that it lost in the recession, in just those two quarters. After the last recession it took 11 years (see chart below).

Chart showing UK construction output

Is that plausible? The man from Fathom is not so sure, for three reasons.

First, there's the surveys, like the PMI. These do suggest a sharp rebound this year, but they are still well below their long-term averages, and Gabay notes that the PMI has actually decelerated since April.

Second, and more curious, you can look at the labour market figures, to see whether this construction boom is leading to a similar jump in employment. The answer is not really. Instead the official numbers show each worker suddenly becoming enormously more productive.

Now, it's perfectly usual for productivity to rise sharply coming out of a recession, as output comes back faster than jobs. Manufacturing productivity is now 7.5% higher than a year ago (it fell sharply during the recession because, as I've discussed many times, output fell much further than employment). But the construction sector is streets ahead, with a 13% increase in output per head.

You have to wonder whether one of those figures - either the output, or the number of heads - might be slightly wrong. It's not beyond our wildest imaginings that construction companies might, shock, have people working for them that they don't tell the ONS about (or the tax man). But it's not clear why they would be doing this a lot more than they did, say, two years ago. As the chart below shows, these productivity figures are much stronger than in any recent boom.

Finally, there is the awkward fact that the ONS has just changed the way it measures construction output, with  the introduction of a new, monthly, output survey.  The new survey got its first outing in - wait for it - the second quarter of 2010, the same quarter in which construction output jumped by nearly 7%. The ONS clearly think the new series is reliable, or they wouldn't have introduced it. But, having not used it before, they can't say for the sure that it's not made a difference.

It's possible that Britain is in the middle of the biggest construction boom in recent memory. Given the lead-times on construction, you'd want it to lead the recovery rather than lag, and there are some enormous buildings going up  in the City.  But has the sector really make up all of the ground lost in the recession in just six months? I leave it for you to judge. I'd especially like to hear from people in the construction business, what things feel like to them.

In the meantime, we can take some comfort from this week's very strong manufacturing figures for October - output grew by 0.6%, the strongest figures since March. Happily, Britain's recovery is built on more than construction. It also seems to have some momentum - even if the middle of 2010 turns out to be slightly less marvellous than the ONS thought.

Comments

Page 1 of 2

  • Comment number 1.

    Stephanie, if you are going to write a story everytime an economist dissagrees with other economists - you will be the busiest yet least productive person in the UK.

  • Comment number 2.

    In answer to your question I think there is something fishy with the figures for the construction industry, unless we are spending more on the olympics than we have been led to believe! There are far fewer large housing sites under construction in the South East and as a developer I know that most of my colleagues have either disappeared or are choosing to remain inactive until matters improve. Also small builders may still have work but I would say that generally the volumes are smaller. In 2008-2009 builders used to give the standard response that they have never been busier but now tend to be more honest and admit that they are not - there just is not the same amount of work out there. Don't forget less work means more competitive pricing- does this lower GDP? House price falls (just starting - more to come)and lack of bank lending or expensive lending rates to finance development projects and mortgages is not helping my sector one bit.

  • Comment number 3.

    Good detective work! No offence to Gabay, but I hope he's wrong... we need all the help we can get right now.

  • Comment number 4.

    There should be little surprise, the government is in the business of keeping everyone in good spirits as they continue to support the wealth of bank stockholders. These numbers are of little matter as it is unemployment that should be the measure. All the different rationales given for bailing out the banks continue to fall flat.
    The answer may be in understanding bureaucracy. The stimulus, remember the stimulus, is finally hitting the streets. It take a bureaucracy about two years to run any project over the multiple desks and departments and actually result is something getting done. The election set the process back as new "friends" would be feeding at the trough.
    One day the policy people will understand that when the middle class has money to spend the economy will do well. Very simple, but the political have been moving the money upwards and profess that big business can produce jobs when there is no one to buy the products....interesting economics...not real economics, just continued robbing of the middle class. At these small percentage increases are projected out, things will get better in about 100 years....encouraging.
    Leadership does not walk on a banker's leash.

  • Comment number 5.

    Steph I can usually work out which angle you are approaching a topic from, this one I cannot and therefore congratulate you on a well balanced approach.

    We all know about statistics but if a method is changed there can be no correlation to previous results (unless some one as worked out a sliding factor, because in all probability it will be based around a hyperbolic function)

    Here in the West Midlands it appeared that all construction of new house stopped about 12/16 months ago and only the ones that had buyers completed. If there was free land it was being built upon, so literally there was houses in various stages of completion. These seem to have now been quickly completed, so there are or appear to be many new unoccupied properties about but for 20K lower than the originals. (I bet they feel sick if they bought one of the originals)

  • Comment number 6.

    To and from work, I walk along London South Bank and up towards the Square Mile. Over the last few years I have seen major building projects become paused, delayed or allegedly mothballed. They have then recently come fully alive again- the Pinnacle, ‘Cheese Grater’, 'Walkie Talkie' etc, and with the Shard now starting to tower over London Bridge, it certainly seems like a boom for construction (in this hot part of London anyway!).

    Could it be that construction projects of size, take so long to move from inception to completion, that we have seen some sort of 'backing up' or pressing ‘pause’, that has then been released the moment the environment has seemed more stable? Could this at least account of some of the rebound?

  • Comment number 7.

    You are right. There are problems with the construction data. But you have to see the problems in two parts. The old series data and the new series data. It is inconvenient that they should have changed at a period of such volatility
    Some moves have been made to improve the new data series that resulted in a sharp revision downward in the second quarter from 9.6% to 6.8%. This has not yet fed through to the GDP figures but will shave about 0.2% off the second quarter.
    There is also a fair chance that the third quarter construction figure will be revised down from its current 4% growth.
    This would still leave us with pretty spectacular growth, but not totally unbelievable, as the rebound from the recession has been more coordinated than has been the case in the past, as was the collapse in workload - the perculiar effects of the impact of the financial crisis followed by the stimulus.
    Normally speaking there are greater lags between movements of the various construction sectors in and out of recession. The net effect is increased volatility.
    Add to this the coincidence of the bad winter coming at the bottom of the recession and at a stretch you can almost accept the figures.
    A further factor is that the new series is more heavily weighted towards new work, as oppose to repair and maintenance. This would also tend to make the new series more lively than the old series, so historic comparisons don't necessarily hold that well.
    But that is the growth rate out of recession, we then need to look at possible problems relating to where we are (the level). It is, in my view anyway, highly likely that the old construction series under reperesented the size of the boom. Without going into too many details, this was a result of issues with the labour force data used to scale up that series for unrecorded output (measuring migrant labour is tricky).
    Calculations I have done for brickonomics suggest the under-recording could have been some £billions.
    The effect of this would be to make the bounce back look more impressive within the series than perhaps it is.
    Still, while there are plenty who doubt the accuracy of the figures, it is the best we have and the good folk at the ONS are trying hard with a horrible job to get the series in shape.

  • Comment number 8.

    Suspicious government figures - surely not. Buy physical silver and bust them.

  • Comment number 9.

    Having contacts relating to construction but not being involved in it I can say that construction is not seen as being on the up in this region. Support services such as electrical work are still a matter for concern. There is clearly overcapacity. Housing still is problematic. I would suggest that the idea we are in the biggest construction boom in recnt memory is a bit optomistic. The job market is apparently nonexistent which leads to further query. I gather the average town has several thousand unemployed. The latest figures for housing mortgages are dismal. If the man from Fathom can't fathom it then it must be, well, unfathomable. Just raises more questions about the reporting of it all doesnt it.

  • Comment number 10.

    Many have questioned the validity of the recent growth figures with the construction sector being the most suspicious because of its extraordinary growth. It may well be dubious as you suggest although some construction industry figures have appeared to back it. However it also reminds me of the way we use economic statistics and I remember a critique of the output figures from a year ago on notayesmanseconomics.
    "One factor often forgotten about these numbers is that really they only give you a range within which the economic indicator (GDP) is likely to have been in but this gets ignored and all the focus goes on a single number. In a more logical world the statistics offices of the world would publish a range within which they feel GDP has been in and look to refine this over time or they could publish an idea of the probability distribution of the numbers. Either would be sensible but neither is likely...... Even after several years have passed there is no guarantee that the number is correct, in fact it may never be."
    So perhaps we would be better looking at the underlying range rather than a spot figure.
    http://notayesmanseconomics.wordpress.com



  • Comment number 11.

    Construction output depends on two things:-

    1. government spending.
    2. housing bubble.

    neither 1 nor 2 look at all positive so the only way is south.

    To save construction (with all its inefficiencies and very expensive ways of working) will need some QE directly into infrastructure and public housing projects. Perhaps the conversion of the, soon to be closed, rump of the university sector into bed sits would be a start!

    The 'Fools of Threadneedle Street' (FoTS - more apt than BoE!) still seem to want to prop up the busted banks rather than spending QE on building assets that have a long term benefit for the Nation.

  • Comment number 12.

    5. At 6:20pm on 08 Dec 2010, common_man_123 wrote:
    "Steph I can usually work out which angle you are approaching a topic from, this one I cannot and therefore congratulate you on a well balanced approach."

    I agree. They're seems to be a little more hesitancy in what Steph is typing, possibly even fear.

    Steph needs to approach every story with the mind-set 'the numbers don't add up'. Then I think we'll get a few more stories where the numbers are questionable and conflicting.

  • Comment number 13.

    Personal experience this year:

    New house building nominal rise.

    Domestic extensions and improvements, significant rise, apparently due to people deciding to convert cash into something of value, which in turn is presumably due to a fear of inflation eroding the value of savings.

    Commercial building and improvements; flat.

    Maybe it's due to extensions and improvements.

  • Comment number 14.

    8. At 6:32pm on 08 Dec 2010, truths33k3r wrote:
    Suspicious government figures - surely not. Buy physical silver and bust them.
    ========================
    I have still got about five silver dollars that I won in Las Vegas in 1975.
    Has anyone any idea how much they are worth?

  • Comment number 15.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 16.

    I think you are missing the other part of the puzzle, which is the oncoming change in VAT and the proposed reforms in planning permission. Many unpopular garden grabs, in particular multi-property builds, have started to beat these changes.

    That is going to significantly increase the amount of new site work in the short term, before the planning reforms kick in. There should also be a correspondingly high fall off due to the inclement weather over the last month (and possibly into the new year).

    The validity of the construction data series will be determined whether it can adequately model these effects.

  • Comment number 17.

    http://en.wikipedia.org/wiki/Eisenhower_Dollar

    AE if they are the standard Eisenhower dollars not very much as they don't appear to have any silver in them. USA stopped putting silver in the coins after 1964 - a modern equivalent of the ancient art of coin clipping. Now know as the Quantitative Easing of the Ben Bernanke.

  • Comment number 18.

    Stephanie you are right to be very suspicious of figures showing a boom in construction. All companies I deal with in construction and associated businesses such as quarrying and cement production are really struggling and are well down on business levels as existed prior to 2007. Furthermore all see great uncertainty from about the 2nd quarter of next calendar year (2011).
    The figures certainly feel very inaccurate and over-cooked. The only exception is suppliers dealing with the olympics construction work, but this is now down too as the major works near completion.

  • Comment number 19.

    Whatever the true position with construction things can only get worse as the enormous cuts in public sector capital spending impact on the industry's order books. Dont get too excited about manufacturing as it expands and converts part time working to full time but also has to face a weak export market. Then there is VAT in three weeks time!

  • Comment number 20.

    17. At 8:40pm on 08 Dec 2010, truths33k3r wrote:
    http://en.wikipedia.org/wiki/Eisenhower_Dollar

    AE if they are the standard Eisenhower dollars not very much as they don't appear to have any silver in them. USA stopped putting silver in the coins after 1964 - a modern equivalent of the ancient art of coin clipping. Now know as the Quantitative Easing of the Ben Bernanke.
    =============================
    Thanks for that. I went and found them and two are indeed Eisenhower faces. The other is a 1921 Morgan which is worth about $16.
    I should have known that since they were being used as currency they would have been worth $1 at the time.
    Back in the late sixties there were quit a lot of coins still in circulation in the UK with a reasonable silver content. I worked for a bank at the time and made a lot of money sorting them out while doing my job of bagging silver. They were a slightly different colour and easy to spot with practice.

  • Comment number 21.

    Ok it's off topic but relevent all the same.

    I am reading that Old Gordy blames everybody else again, as per the norm, but ofcause he did save the world!

    When asked to defend his own record in government, the former chancellor and prime minister claimed he had called for years for better international financial regulation.

    The next questions should have been; SO WHAT DID YOU DO ABOUT IT? WHAT ACTIONS OR PLANS DID YOU PUT IN PLACE TO STOP IT HAPPENING HERE OR AT LEAST SOFTEN THE BLOW? YOU HAD A MAJORITY GOVERNMENT AND ON BALANCE THE UPER HOUSE, YOU COULD HAVE RAILROADED REGULATION THROUGH? To back quote sugar - you where fired!

    Mind you with preprepared/agreed questions and the real posibility of being called a comy, there are not many journo's out there quick enough or willing to take a risk.

  • Comment number 22.

    Well Steph, I know the answer you and the BBC and its moderators want to hear !
    YES!!! What we need is a new labour government, total control handed to europe and a campaign to keep new labour run by public school kids-isn't that toff of toffs Teddy Millibrand cute! And so good at play acting being a prole! This and a licence fee hike will put the whole economy bang to rights!

  • Comment number 23.

    Watriler @ 19 wrote..
    Whatever the true position with construction things can only get worse as the enormous cuts in public sector capital spending impact on the industry's order books.

    --------------------
    The story on the BBC website about decimation of public sector building programmes due to the spending review was wrong. Those figures included the cuts already decided by labour and implemented over the last year, before the spending review. Most of the cuts in capital spending within social housing have already happened and were planned years ago.

    Overall, construction is a mixed bag. Some companies had cut staff drastically immediately after the credit crunch but other companies have cut staff drastically over the last year as a result of government spending cuts.

    I believe that government investment in housing has already halved over the last year as a result of cuts put in place by Labour. There isn't much left to cut in that area but there are still some further cuts to come. The budget for the housing revenue account for 2011 financial year will not be announced to social housing providers till February next year.

    The spending review was mostly smoke and mirrors. The cuts were hyped so when the real cuts happen at a level that is still unprecedented, people will say "it's bad but not as bad as I thought it was going to be".
    Unfortunately the BBC doesn't always check its facts, for example when Philip Green made his suggestions about public sector savings there was no mention by the BBC that many of the suggestions were illegal, for example it's illegal for the government to enter into bargaining with suppliers due to anti corruption laws.

  • Comment number 24.

    I‘ve noted the following this year, namely:
    People spending money on house improvements, which, under normal circumstances, they probably wouldn’t do.

    The reason they give (albeit not in all cases) is because they believe that the value of money will be eroded by significant inflation in the near future.

    And I’ve not just noticed house improvements.
    People I know; sensible and reasonable people, (at least as far as I can judge), have been withdrawing money from banks and converting it into gold, silver, antiques, shares etc., in short, anything that they believe will hold its value.

    As far as I can see, some people seem to have lost some faith in ‘0’s and ‘1’s held on computer chips that represent ‘money’ (saved up wealth).

    People seem to be questioning whether those ‘0’s and ‘1’s are safe.
    In short whether when push comes to shove, they can be converted into something of value.

    It makes me wonder whether the financial industry has pushed it, a little bit too far.

    In any event, I recommend that you tread carefully now Great Uncle Mervyn.
    ‘Faith’ is critical, because its counterparty ‘fear’ considers little consequence of its actions. If faith is lost, those ‘0’s and ‘1’s held on computer chips, are at the mercy of fear.

    This country desperately needs some monetary reason, and the positive money group endeavour to offer it. Will you let this opportunity slip Mr King?

  • Comment number 25.

    Government "investment" and its expenditure was always planned to be at record levels in 2010.
    Government central local are spending their 2010 budgets, the ones that were designed and meant to fend off the recession.

    In case you have not noticed Government borrowing is still at record levels,and so far the promise of future cuts is keeping the loan markets happy (maybe they were never that twitchy, maybe it was only an highly effective black propaganda campaign by the dedicated "small government" movement got us ready to accept our fiscal slimming "medicine" on health rather than doctrinal grounds)

    The cuts we are all facing are almost entirely going to kick in during 2011-12
    The construction industry is feeling the benefit of the 2008-10 spending spree but this may well be the last hurrah for some time
    As projects are completed and new contracts evaporate then the construction boom (which in fairness is visible and anecdotaly backs the figures)will turn to bust and the "recovery" will disappear

    Perhaps the dreaded "double dip" will appear even more dramatically given that the recovery appears to based, as Irelands was, on the construction industry and their dodgy figures
    An industry that is highly volatile and driven from boom to bust (and vice versa)almost overnight,and backed by numbers that are, like many a builders estimate,wildly inaccurate, and sadly almost always at the buyers ultimate expense

  • Comment number 26.

    Steph,
    run a correlation on the flux in Portland Cement sales/usage (a really concrete measure ;) with the data on UK Productivity (Construction) over the relevant quarters. Deviation through low correlation coefficient will tend to suggest that the 3rd quarter jump is wishful thinking.
    Geoff.

  • Comment number 27.

    jimp1720 @ 25

    It's true that most of the government spending cuts haven't happened yet, but the decent homes programme, which was the major capital programme within housing peaked before this financial year. The reduction in this year's housing investment programme was planned some time ago, in fact shortly after the credit crunch. There have also been major problems with PFI funding for schools and hospitals, though the contracts that have been signed have been cheaper to complete than abandon. I think construction has had an appalling time and is recovering slightly. There are a lot of other disasters waiting to happen though.

  • Comment number 28.

    construction has picked up after being out of work for eighteen months i am now in regular employment but it has come at a price the day rate i get is what i was earning in 1990 diffulcult times indeed and if the weather continues like this the uk will be a construction free zone for many months.

  • Comment number 29.

    Well common sense tells me that it is impossible for construction to resume on the same basis as previously for several reasons, the model has to change
    Retail devepment, we just dont need anymore retail (now or for the forseeable future), we now have a very efficient internet shopping industry too
    Domestic housing, everyone knows the various problems with this sector, prices about double where they should be, shortage of credit, high deposits required, this sector cant move ahead until prices fall substantially
    Thirdly, and this is a biggie for the next decades, young people (first time buyers) could soon be starting working life with student debts of £40,000 (£9,000 per year fees + living costs) or more which will be repaid via the tax system, EVEN those that get a well paid job are not going to be in a position to take out large mortgages, and so the housing and construction market can not move ahead on the previous model, prices will have to fall dramatically for the industry to resume, this obviously has effects on the DIY, retail, furniture industries as well.
    To me, this is obvious, and I cant see how anyone can imagine that construction of houses, shops and commercial premises can recover to previous levels....it aint going to happen, so if there is a construction recovery....its a blip

  • Comment number 30.

    At last some ... GDP examination.

    There are huge problems with GDP (and incidentally most countries calculate GDP differently) and many UK construction materials are imported and some have export tariffs from the exporter as costing more and ... and all counted as 'growth'.

    Construction companies tend to look 2 years ahead with some purchases for stock buying when prices are good and re-selling to DIY outlets etc and buying is seasonal and we had a late labour govt spendaholic construction spending spree (Sping 2010) on govt borrowed money.

    Ask anyone who lives outside of London and the SE and they will tell you ... the recession/depression has a real bite.

  • Comment number 31.

    Here we go again. Now its the turn of another left wing brigade, the BBC, to try to damage confidence in the British economy for political reasons.

    I never heard any doubt about all the dodgy figures produced by Gordon Brown or Darling. How often did we hear of his off-balance sheet accounts. When they said we would not even go into recession I don't recall the BBC casting any doubts about that either, even though it was obvious to everybody where we were heading.

    And speaking of dodgy figures how come we hear so little from the BBC about the dreamland accounts of the EU?

  • Comment number 32.

    common_man_123 - the great thing is that when G Brown pops his clogs (and as he's quite fat that might not be so long) he won't be able to push out his point of view. And everyone else will remember him as one of the worst chancellors in UK history, because he was.

    Housing construction would pick up if people could build houses without the council wanting a massive pay-off and if NIMBY groups allowed greenfield development. The difficulty in building a family home on bought land is propping up house prices by restricting supply.

  • Comment number 33.

    Hey,

    Stephanie, I'm pretty sure you're aware of this, but any difference between the new and old surveys precludes before-and-after comparison. Put it this way, if the old survey were under-reporting construction activity (a 'systematic', in the parlance, because its a feature of your measuring system rather than the thing you want to measure), the new, more accurate survey would show exactly this kind of productivity 'jump' without any actual change in activity. It's rather more complex, of course, because for the points you made an increase is expected, so the data probably shows both real effects and the effect due to the newly-absent systematic. Running the two reporting systems side-by-side for awhile would allow one to get a handle on that kind of systematic error, and I'm a little surprised this wasn't done (or maybe it was?)

    Yours,

    Jonathan

  • Comment number 34.

    Dempster - you know people with savings? I agree fiat money is a joke, but if the minority of savers are getting out of cash that is a minority within a minority.

    Most people under 35 that I know fall into 3 catagories:

    1. in debt all the time
    2. rent and live month to month, no savings beyond say a coupe of hundred quid.
    3. own a house as they got the deposit from their parents around year 2000. Live month to month, no savings. Would say their house is their savings.

    Myself and my wife know tens of middle class people our age and none of them bought a house without help from their parents.

    A friend of ours who has a pretty bad job in admin outside London has a different circle of friends and only knows one person her age who owns a house.

    My point is that there is very little slack in the system. For most a currency disruption would not ruin their savings as they have none. The resulting inflation would stretch most. Those who consider themselves stable are underpinned solely by the housing market.

  • Comment number 35.

    Stephanie
    I am married to a builder in the west country, he like others in our area has been frantically busy all year, why ? I will tell you.
    Home improvements, extensions, new roofs, new kitchens, new bathrooms.
    Retired people with money in the bank not earning a penny, spending it on their home.
    People who have decided to spend on their home rather than leave capitol declining in banks.
    People who earn more by purchasing a buy to let outright than interest on an investment.
    All want work finished before the V.A.T increase comes into effect!

    People are scared what the future holds, bricks and mortar are tangible assets in troubled times.

  • Comment number 36.

    To 34. At 09:10am on 09 Dec 2010, Ben

    I live up north and my age group are the ‘over 50’s’ lot.

    In any event, my personal observations of what’s happened thus far:

    2007 Credit crisis starts, & there’s run on a British bank as the Northern Rock goes down, people are surprised and curious.

    2008 RBS & HBOS fail, and some people start to lose a bit of faith in ‘money’ and convert it into gold and other items of intrinsic value.

    2009 The Band of England prints £200bn. More people lose faith in ‘money’ and convert it into gold etc. Inflation kicks in and wages stagnate.

    2010 Inflation continues and wages stagnate for a second year, more people try and protect their savings. The demand for index linked savings certificates is so great, they stop selling them.

    From the Office of National Statistics website:

    Average weekly earnings (whole economy not seasonally adjusted):
    Jan 2009: £444
    Sept 2010: £443 (provisional)
    Wage inflation = – 0.002%

    Retail price index (all items):
    Jan 2009: 210.1
    Sept 2010: 225.3
    Price inflation = + 7.2%

  • Comment number 37.

    Construction fell off a cliff in summer 2009 but has since climbed back up on the back of the easy-money scenario now so popular with the majority in the UK.

    I have seen commercial construction going on recently which in my view cannot be justified in the immediate term so perhaps some commercial property businesses are building themselves a bank of stock for some future recovery. With interest rates where they are that would seem shrewd. I feel they are being hopeful but nothing beats romancing the shareholders.

    I have also seen a lot of domestic construction activity. The argument for that seems to be that the cash is earning nothing at the banks so lets sink it into building or improving our property. Given falling house prices I wonder how long that is going to go on.

    Still, I won't begrudge a man his work and a wage. We will all have enough time to reflect on this when the sterling crisis hits....I told an Irish friend yesterday that his country was just the first in the queue. They are polishing off the little ones first, then they will come for the bigger fish.

  • Comment number 38.

    Let's also offset those growth figures with a huge increase in public spending, eh?

  • Comment number 39.

    This thread appears to highlight a number of problems with a series of issues:

    - Change of statistical reporting
    - The nature of the industry
    - Regionality

    Statistics

    Brilliant things aren't they? Whilst more accurate reporting is always welcome it is embounden upon the 'authority' making the changes to be both aware of the consequences of those changes and to provide a clear transittion vehicle so that accurate comparisons can be made with previous records. In this instance these factors appear to have been forgotten.

    Industry

    It is clear from the posts above that whilst some people consider the industry to be majorly concerned with large capital programmes whilst others focus their attention upon housing. We need to be more clear about which elements we are talking about.

    Regionality,

    In #6 james points to continuing work on projects on the banks of the Thames. Others outside of the South East report that there is little sign of activity. It is my belief that this holds true for the majority of industry sectors. It is not just a housing bubble that has effected our economy. We are now seeing the effects of the regional bubble.

  • Comment number 40.

    With Bank Rate at .5% for 20 months (sorry if you've all heard this before...)

    Either 2 things will happen.

    1. The biggest stampede you've ever seen by the under 45s for loans; or
    2. The biggest stampede by the over 55s to convert cash into something more rewarding. (but not holidays in the Costas)

    I've seen no evidence of 1. - because no-one seems to want more debt - not even at these prices. - Or maybe the lenders don't want to lend . Either way -

    That leaves 2. And the "something more rewarding" is property, gold, or other 'tangibles'. Those choosing gold have probably missed the boat. So maybe the "Construction numbers" are not so wrong.

    Those between 45 and 55 are too worried about their pension prospects to make any rash moves in either direction!
    (I'm happy to be flexible about the age ranges)

  • Comment number 41.

    Stephanie,
    I owne one of the largest decorating contractors in the South of England - I think the true picture is somewhere between both extremes.

    I don't think the true effect of the recession is played out in the official figures - masked by the largest construction projects (Olympics etc).

    The house builders stopped building for 12 months just selling off surplus stock. They are now building again at levels some way below the recession - but they are building.

    The use of subcontract labour probably helps to explain the new found efficiency of the industry. Firms employing 50 odd subcontractors were down to 5 - those that didn't go bust tried to keep as many of the back office staff on ready for things to get back to somewhere normal. You can double the number of subcontractors very quickly without having to increase the back office much.

    There are certainly people out there that don't play it straight.

    Contact me via the web site [Unsuitable/Broken URL removed by Moderator] if your interested in talking at more depth.

  • Comment number 42.

    It's the 'Happiness Index' that matters now.

    G

  • Comment number 43.

    I am an insurance broker and I have to say that with one exception all our construction clients have exceeded turnover and wageroll estimates over the last year and are projecting the same levels for next year with some posting increased projections. So may be there is something in the figures from the ONS

    Craig

  • Comment number 44.

    Hi moderator - you can pass my e-mail address on to Stephanie if she is after more information [Personal details removed by Moderator]

  • Comment number 45.

    TimSavi

    Please can you give some indication on what level of demand as a rough percentage, in terms of monetary amounts, is coming directly or close-to-directly from government spending?

    It's my contention that any rise or levelling off in GDP has to take into account that the government just spent 11% of GDP as deficit stimulus. Take away that and the whole economy would just crash through the floor.

    Does that sit with what you experience?
    Regards

  • Comment number 46.

    What recovery? There never was one. Pre-credit crunch the economic growth over the last 20 years has been as a result of people spending by taking on debt. The only way we can recovery is for people to take on more debt. But this is not going to happen when we have reached a point of peak debt. Therefore there will be no recovery until debt levels are reduced either by people paying off debt, which will take decades, or the debt is destroyed through default, which will probably bring down the banking system. Rock and a hard place. The only solution is monetary reform (see Positive Money web site).

  • Comment number 47.

    Hi Stephanie,

    I don't know if this helps or not, but all Social Housing projects had been completely frozen since last year and even though budgets have been cut by the new government the fact is that they are now going ahead again where they weren't before.

  • Comment number 48.

    Developers have started up again and finished off existing housing developments recently. There are signs of increased refurbishment of office blocks in major cities. Prime development land is going for very high prices across the UK. London in particular as a global centre and the location of the Olympics has had alot of activity but now actual construction of many venues must be nearing completion.

    Certain sectors are busy however some have been going through what is euphemistically called 'right sizing' particularly areas which relied on government spending. This has been happening for about a year in the private sector. The public sector has achieved a reduction in size to date by letting its private sector secondees, etc go. As a rule the minimum possible is being spent by government and it could be this way until the new financial year.

    Thus I would say in the UK in general for the UK construction industry there is a great deal of uncertainty about the future. Whereas in the boom years the uncertainty was about whether grow could happen now its about whether further contraction will happen. A few people think we haven't seen the end of the contraction in the construction industry yet. I get the feeling things are abit like they were in 1992 now. I have heard from others that many insurers still have developers they lent too much to and have them effectively on life support. Many city centre flat developments loans are being paid for by rental income still.

    It isn't all doom and gloom and with a fair wind things could get better. I'd say the construction industry should be roughly steady for the whole of next year at best.

  • Comment number 49.

    #46 - Too right. Also, I recall recently hearing a 'respected economist' calling for Germany and China to encourage their populations to take-on more debt in order to 're-balance' the world economy. Of course, what he really meant (pleading for) was for these nations to 'save' the west from its own profilagacy and irresponsibility - fat chance! The quest for ever more debt-slaves required to prop-up the international Wall Street/City Ponzi scheme truly knows no bounds.

  • Comment number 50.

    Tick, tock, tick tock....you can hear the wheels of economic journalists minds slowly turning.....

    "and there are some enormous buildings going up in the City"

    True - but WHO IS GOING TO FILL THEM???

    There are over a million square feet of empty commercial space within 1 mile of Bank station - that's with the existing buildings - why does anyone think that there will be sufficient demand for the new buildings too?

    ...because they all have so much invested - that's why....it doesn't mean it's going to happen, it just means they're all going broke if it doesn't!

    Oh how the weak are led to their doom - so easily and so complicitly...

  • Comment number 51.

    50. At 1:56pm on 09 Dec 2010, writingsonthewall wrote:
    There are over a million square feet of empty commercial space within 1 mile of Bank station - that's with the existing buildings - why does anyone think that there will be sufficient demand for the new buildings too?
    --------------------------------------------

    Sounds the same as Dublin....

  • Comment number 52.

    @26 GeoffWard
    @35 ruralwoman

    Excellent comments...you've both "hit the nail on the head"
    If only our economists had the same insight !!

  • Comment number 53.

    I worry rather less about construction than manufacturing. Remember the area that is supposed to lead us out of recession. UKgov spending cuts are already leading to a factory closure by BAe, surprisingly, our biggest manufacturer.

    Would it not have been wiser to have cut something that we are buying from the US - like the non-functional Joint Stike Fighter? Does our Gov worry more about making a bad impression across the Atlantic than supporting UK manufacturing?

    If everything else closes, what do we do with empty buildings?

  • Comment number 54.

    49. At 1:39pm on 09 Dec 2010, TheNewPonzi wrote:

    #46 - Too right. Also, I recall recently hearing a 'respected economist' calling for Germany and China to encourage their populations to take-on more debt in order to 're-balance' the world economy. Of course, what he really meant (pleading for) was for these nations to 'save' the west from its own profilagacy and irresponsibility - fat chance! The quest for ever more debt-slaves required to prop-up the international Wall Street/City Ponzi scheme truly knows no bounds.
    =====================================================================

    Very well observed- just because the "anlgo saxons" (that's us and the USA} have behaved collectively like complete fools, we expect the rest of the world to do the same to save our bacon.

    The number of posts on these blogs which criticize nations and/or individuals who put thrift before consumption just beggar belief. Since the current (so-called western} world economic model relies on this kind of thinking, then no wonder it is down the tubes.

    Everyone else in the world can see that borrowing to consume is just a fool's paradise. Time for a rethink in the UK, if it's not too late (the USA will never change-instant gratification is all they understand).

  • Comment number 55.

    I hope we haven't used all of the nation's stock of salt in the last three weeks because we all need to keep a very large spoonful handy to take with the masses of economic data we are bombarded with. As the economic house of cards relies on good news to keep it from collapse, it's only to be expected that official figures will paint the rosiest picture.

    This is a timely debate because out here in the real world, a million miles from the M25, the economy looks like a bedraggled three legged moggy so it's nice to know that the poised tiger illusion coming from the 'talk it up, they'll never catch on' brigade, might be a load of rubbish, is heartening to those of us who had been left scratching our heads in confusion at how the figures could be so different to reality.

  • Comment number 56.

    The UK construction industry is acting like Kevin Costner in that film "Field of Dreams".

    "Build it and they will come" - is the line, but sadly you have more chance of deceased baseball stars turning up and filling these new office blocks than any viable business.

    If you think we're bad at getting our GDP wrong - Japan have just resorted to 'guesswork'!

    http://online.wsj.com/article/SB10001424052748703766704576008983510168062.html

    ...still they have been in crisis a lot longer than we have - do you think underplaying the GDP numbers has anything to do with the desire to be the 'weakest' weak currency in the world perhaps?

    Fortunately we're not that cynical are we?

  • Comment number 57.

    51. At 2:32pm on 09 Dec 2010, Kit Green wrote:

    "Sounds the same as Dublin...."

    ...but the Irish do it with a lot better humour.

    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 58.

    53. At 2:38pm on 09 Dec 2010, WolfiePeters

    Wolfie - this is how you SAVE defence spending! (well in the new coallition way)

    http://www.telegraph.co.uk/news/newstopics/politics/defence/8191690/3.6-billion-Nimrods-dismantled-for-scrap.html

  • Comment number 59.

    Interest Rates at 0.5% for nearly two years.

    Real inflation at over 4% pa.

    Hundreds of billions of QE.

    And you think these GDP construction figures look strong?

  • Comment number 60.

    "De-constructing the recovery" is the title of Shephanie Flanders blog.

    Oh, dear - so much going on behind the scenes in UK defence procurement cuts under current Conservative/LibDem Government.

    They don't sack the incompetent mandarins or name and shame ALL the previous incompetant Labour Ministers responsible for wrecking the MoD and placing our troops in areas of conflict without proper equipment.

    This Government is now just simply (fully-planned before election) selling on defence to countries who have no interest in our defence.

    BAE systems sold to America with subsequent products made in China to increase shareholders and investment bankers income - the same people who never allow their own children to go to war, but make $billions out of those who do across the world?

    Perhaps we should sell our armed forces too and only rely on mercinaries as do some States in Africa? No pension, no accommodation, no wages and no loyalty.

  • Comment number 61.

    #59. Elduderino01 wrote:

    "
    Interest Rates at 0.5% for nearly two years. Real inflation at over 4% pa. Hundreds of billions of QE.
    "

    We know what this means - even though the BoE will never admit it. The banks are bust and their balance sheets are even more fictional than is usual. However no one will admit this for to admit this will inevitably lead to the need for even more taxpayers' to bail out the busted banks.

    But - Mervyn King is being extremely foolish for he is sacrificing the medium and long term for the ultra short term. His thick glasses must have clouded over completely! Just as he caused the bubble and the collapse he is now deliberately creating the conditions which have to lead to another even worse collapse very shortly.

    Interest rates must rise on the basis of inflation - that is unavoidably and obsoletely imperative. But the "Fools of Threadneedle Street" (calling them a Bank is risible) are so obsessed in rescuing their friends they are either oblivious to the plight of the country or consider that everyone must rescue bankers even at the cost of their very lives!

    We must cap bankers pay. Introduce a National Maximum Wage for these idiots bankers who are on the most generous conceivable social security scheme - because make no bones about it bankers are receiving our money just like the poor and the crippled - except they get many hundreds of times more - why should they?

  • Comment number 62.

    Stepanie,

    The construction industry was given a large boost due to the kickstart programme introduced by the last government via the HCA. There was as a result some 150 plus projects started in march and the suppliers were in the situation of overcapacity during the summer supporting what was perhaps a one off spike in the output. It looks unlikely this can be maintained but maybe this has provided some momentum.
    I agree the figures otherwise cannot stack up

  • Comment number 63.

    There are lies, damned lies and statistics. Not for nothing is economics described as a dismal science. I don't believe a word of it. No one is spending or building much except for the last rump of public scemes like new health centres etc and cash for welfare and dole benefits.

  • Comment number 64.

    Personally I think the fishy construction figures are probably correct and due to ( the cash rich retired ) moving money from banks into bricks.
    If you had £150.000 sitting in a bank, what would you do in uncertain times?
    A ) Buy a rental property in a hot rental market and earn £600 per month or earn next to no interest while you watch your capital depreciate?
    B) Repair or improve your home, ancient roof or dated kitchen or leave your money in sitting in a wobbly bank knowing material and construction costs are on the increase?
    If you cant sell your home and if you have funds at hand, you might as well improve or repair it and be ready for any upturn in the housing market... because your a long time dead.
    60s mods and rockers have proved to be a savy bunch, we grew up listing to parents talking about tough times during the war, have ridden a property boom and intend to protect assets.
    Bet the construction figures go splat in the next 3 months when the VAT increase comes into play.

  • Comment number 65.

    Stephanie

    I think you are right to be suspicious.

    I work for an engineering consultancy and our building engineering work has fallen off a cliff this year, culminating in a substantial number of redundancies.

    OK, a lot of our business is international, and some of this is fall-out from a slow down in Middle East activities, however we are certainly not seeing a construction boom here in the UK.

  • Comment number 66.

    A low-brow comment- very little sign of significant development or planning applications over the past year in my part of the south. I suppose the new Brighton stadium can be added to the Olympics big ticket stuff.

    Am aware of some local private interest in green investment, particularly Mr Ded's FIT scam.

  • Comment number 67.

    Seen reported today...NINETY per cent of the container ships heading to Northern Europe from Asia have been forced to slow to the speed of a "fresh breeze".

    So it looks like the lack of demand for fresh stock will show a new downturn over the coming months.

  • Comment number 68.

    "But - Mervyn King is being extremely foolish for he is sacrificing the medium and long term for the ultra short term. His thick glasses must have clouded over completely! Just as he caused the bubble and the collapse he is now deliberately creating the conditions which have to lead to another even worse collapse very shortly."

    I think you need to see Merv's big picture. It's hanging in his big house. Merv does what keeps Merv in a big house for the longest possible time. Seen from this aspect his behaviour is 100% rational.

  • Comment number 69.

    If we are honest can anyone beleive any government figures. No government figures are reliable having been constantly manipulated so they do not have any credibility. Despite the long touted independence this is meaningless.

    Sadly, the effect is that it is almost impossible to plan on the back of government data. Certainly any rise in interest rates will result in a double dip since the growth in the economy is so fragile and the cust have yet to bite.

  • Comment number 70.

    60. At 4:32pm on 09 Dec 2010, corum-populo-2010 wrote:

    This Government is now just simply (fully-planned before election) selling on defence to countries who have no interest in our defence.

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    I remember commenting to that effect back in the summer, when Ishkandar and I were debating sovereignty and I was lamenting our "open-boarders" (sp) policy.

    At the time I thought it was a joke.

    When the carrier fiasco was announced, and we signed a joint accord with France for naval support, I realised it wasn't a joke any more.
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~
    Anecdotal evidence...two years ago, our local builder's merchants took their advertising cards board down, and being a regular customer, I asked why.

    They said "all the Eastern European builders have gone home, there's no work for them any more, and the UK guys don't see the need to advertise to each other."

    I agree with ruralwoman, though, since they closed index-linked national savings, and reduced the payout of the premium bond, where else are the wealthy pensioners to put their cash? Lots of local builders doing jobs and staying below the VAT threshold.

    But only those with savings can spend. Regarding a low base rate, the headline rate for a secured loan in the high-street is around 5-7%, and if you try to obtain that, by the time you go through the application, the actual rate is nearly 20%.

    JohnfromHendon is right, the banks are more broke than anybody could possibly imagine.

    But as I suggested yesterday, if government spending is financed by borrowing, government is beholden more to the banks than it is to the electorate.

    The earliest record of this situation in English history may well be King John, (a profligate and dissolute monarch.) When he ran out of money, we got a new constitution (the Magna Carta).

    The questions is, what are we going to get now the robber baron's pockets are empty as well? Loss of sovereignty and foreign ownership is the inevitable result. Utilities (EDF and Eon), Banking (Santander HSBC and Barclays), Defence (BAE etc.) and Legal government (Brussels).

    When Britain joins the Euro (which it will), it will remain a nation in name only.

  • Comment number 71.

    #26 >>Deviation through low correlation coefficient will tend to suggest that the 3rd quarter jump is wishful thinking.
    Geoff.

    But they don't build them of cement any more !! They build them with sticks and straw and the first Big Bad Wolf that comes alone will huff and puff and blow them all down !!

  • Comment number 72.

    #30 >>Ask anyone who lives outside of London and the SE and they will tell you ... the recession/depression has a real bite.

    Ask anyone living in London and they'll tell you the same, too !!

  • Comment number 73.

    Construction output figures ??The easy way to check these figures
    is to ask the builders merchants,aggregate suppliers,timber merchants,
    plant hire firms etc, what there figures are.
    Michael Tosh

  • Comment number 74.


    I am employed as a construction loss adjuster and the feed back I receive from sites that I visit is generally pessimistic.
    However, it's possible that the figures have some basis in fact. A number of multi billion pound infrastructure projects that don't make the headlines have reached their zenith during the last six months, e.g., M25 widening, several large National Grid jobs and PFI work such as London & Barts Hospital. but these are all coming to completion within the next 12 months and there is little to replace them it seems.
    The brokers who place the large 'project' policies in the London insurance market complain that business has tailed off dramatically.
    Stand on any bridge in London and count the tower cranes. Two years ago you would see a minimum of 40, at present you will struggle to count 20.




  • Comment number 75.

    I'm no expert in this, but... The figures being discussed are Output GDP figures (the Expenditure GDP figues show hardly any rise at all). Output GDP measures the added value generated by each sector during that period. Presumably this includes unsold stock. So if the construction industry were building up a stock of unsold homes and offices, and being generous in how much it declared them as being worth in its accounts, then that would be counted as a contribution to Output GDP. I wonder what happens if they just revalue the land they are sitting on. Does that count towards GDP too?

    Overall, the GDP figures are unreliable, and the inflation figures are unreliable too - so the Government is steering without a compass.

  • Comment number 76.

    70. At 09:13am on 10 Dec 2010, stillpuzzled wrote:
    ...Loss of sovereignty and foreign ownership is the inevitable result. Utilities (EDF and Eon), Banking (Santander HSBC and Barclays), Defence (BAE etc.) and Legal government (Brussels).
    --------------------------------------------------------

    Last Saturday The Times reported that Berkeley Homes were selling 40% of their new builds in London and the SE to overseas buyers. This compares to a historical average of 12%. Their income in the six months to October was up 20%.
    A similar position for sales outside new build was also reported.

    Are these properties for owner occupation? Surely not. So we are also going to be renting from more foreign landlords. This is not in itself wrong but the fact they will be taking money away from the UK and probably not paying tax here means we are getting more and more "fare dodgers" sucking us dry without contributing to the nation.

  • Comment number 77.

    When UK was going through its "boom", just like the Irish, the whole place was over-run by Eastern Europeans who also needed housing (albeit temporary housing) !! Now many of them are gone and those housing will stand empty; increasing the pressure on the price of properties. How will the construction companies deal with that when they can no longer make as much profits on each unit they build ??

    This "boom" may well be a blip or a "statistical anomaly" and the long term future for them looks very bleak indeed !! You won't catch me buying shares in construction companies in the near future !!

    Those "green shoots of recovery" are looking more and more like dreams fueled by illicit substances !!

  • Comment number 78.

    #68. Ben wrote:

    "I think you need to see Merv's big picture. It's hanging in his big house. Merv does what keeps Merv in a big house for the longest possible time. Seen from this aspect his behaviour is 100% rational."

    But that is NOT why he is being paid is it (as well you know)!

    He should have been sacked some time back. The longer he hangs on - the more tenuous his grip on his big-house becomes. He has made the wrong call at the wrong time ever since he got the job - he is still doing it now. The longer he hangs on the higher the probability is that it will not be his big house to which he retires, but an entirely other kind if he continues to pay no heed to the real economic conditions and policy necessities!

  • Comment number 79.

    77. At 10:26am on 10 Dec 2010, ishkandar wrote:

    Those "green shoots of recovery" are looking more and more like dreams fueled by illicit substances !!


    But when said 'illicit substances ' are legalised at point of production, supply and consumption think of the tax revenue and jobs created.



  • Comment number 80.

    Actually ,Stephanie there has been a huge turnaround in the construction sector and it is enough to generate the growth we have seen:

    Here are a few instances:

    1 Some huge hospital projects nearing completion.
    2Some huge roads projects .
    3Tram and railway projects.
    4Personally....I have completed 2 hitherto-in-mothballs projects with a developed value of 2 million quid.And if I got funding then others did too.
    5My architest is doing a lot of projects at the moment and not all Labour-commissioned public spends.
    6My brother , a leading development surveyor,is rushed off his feet.
    7Spoke to a chap working for UK's leading wholesale supplier to the buiding trade of kitchen and bedroom fitted furniture ...... they are really busy too.
    8My business banker says they are lending again.

    So when my personal experience is reflected by others I know then I know

  • Comment number 81.

    Oblivion

    We do not have much work directly with Public sector. We work on a few school re-ferbs but not much. Interestingly we are on several Council Preferred supplier lists but have received no enquiries...if I ever got the time I would like to find out what is going on there.....and don't get me started on the CompeteFor programme.

    The nearest we have get to Government is generally working for the builders that are building social or affordable housing. During the depths of the recession these were the only flats that were being built so we were probably doing 80% of our turnover (the last Government has to be praised for this at least!). This work has now tailed off and as the private buyers come back to the market we are probably on about 20% of turnover now.
    Looking at the government procurement sites there has been a huge reduction of tenders since the election - I presume before the election departments were frantically spending their budgets to stop them being removed after the election!

  • Comment number 82.

    http://www.director-e.com/news/index.asp?newsid=5861
    Please view this link, if I'm not breaking house rules about external websites, according to a report published by EEF, the report says Britain's manufacturers are continuing to report strong trading conditions with indicators for output remaining at record levels for the third quarter in succession. Apologies if the BBC has already reported this.

  • Comment number 83.

    Don't people realise that this is a depression. Some areas of the economy will record strong positions. However when you look across the whole economy you find that they were either temporary or off-set by even greater decline in other sectors. The one thing that you can be certain of is that there are no 'bell-weather' sectors.

    # 79

    :)

  • Comment number 84.

    Just to add to my previous post which was number 10 on here. I notice that today notayesmanseconomics has spotted some problems with our producer price inflation numbers and questions the Office for National Statistics in this area.
    "This is at best very embarrassing for the Office of National Statistics. It was only last month we found it making methodological changes to its calculations of these numbers and now suddenly it has such problems it cannot publish part of them."
    So there may be more widespread problems at the ONS rather than just GDP numbers.

  • Comment number 85.

    #76 Kit Green
    "Last Saturday The Times reported that Berkeley Homes were selling 40% of their new builds in London and the SE to overseas buyers. This compares to a historical average of 12%. Their income in the six months to October was up 20%.
    A similar position for sales outside new build was also reported.

    Are these properties for owner occupation? Surely not. So we are also going to be renting from more foreign landlords. This is not in itself wrong but the fact they will be taking money away from the UK and probably not paying tax here means we are getting more and more "fare dodgers" sucking us dry without contributing to the nation."

    That's the problem when you continually run a trade defecit you end up with foriegners hold lots of you currency - and rather than sit on it in light of high inflation and low interest rates they decide to invest in something tangible. Increasingly we are going to have to sell more assets to pay for all our imports - many of which we should be producing here in the UK.

  • Comment number 86.

    76. At 10:25am on 10 Dec 2010, Kit Green wrote:

    Last Saturday The Times reported that Berkeley Homes were selling 40% of their new builds in London and the SE to overseas buyers. This compares to a historical average of 12%. Their income in the six months to October was up 20%.
    A similar position for sales outside new build was also reported.

    Are these properties for owner occupation? Surely not. So we are also going to be renting from more foreign landlords.
    ~~~~~~~~~~~~~~~~~~~~~~~
    Somewhat puzzling...since JfH continually predicts/requests a 40% devaluation in house prices.

    Why would you put your hard-earned Yuan/Roubles etc. into an asset that is likely to devalue? Makes mushroom think the smart money is buying for the continual income without worrying about the "asset price".

    Let me think...pay 250k in cash, which was getting 2.5% in the bank (6250 pa), and receive back 1200 pcm in rent. After expenses, that could be 8-10,000 pa. Seems like a deal to me. Works even better if you do a deal wiht the banks to bulk buy repo-s on the side, to keep them from affecting the market price.

    Anyway, if you are riding the pendulum, house inflation outstripped prices for 10 years, and now its catch-up time. Prices must now inflate faster than houses making the pound in your pocket worth a lot less next year than it was this year. (Anybody else noticed 1.20 per litre for unleaded?)

    Can't remember if it is a bull or a bear, but mushroom thinks that if you slosh your money around at the right time, you can always make something of it.

    Great, eh...it looks as if the banks can't raise saver's interest rates, because they will also kill off 40% of the market for new-build, and "property" may well be the biggest single entry on their books?

    That won't be good for the "Construction Industry", now will it?

  • Comment number 87.

    #86 Still Puzzled wrote:
    Somewhat puzzling...since JfH continually predicts/requests a 40% devaluation in house prices.

    Why would you put your hard-earned Yuan/Roubles etc. into an asset that is likely to devalue? Makes mushroom think the smart money is buying for the continual income without worrying about the "asset price".
    =================================
    Perhaps they are ignorant of the Great Man's prediction/hope. Who would you believe: a ranter or people putting down their own money?

  • Comment number 88.

    Lets see Pay Freezes, with Official Inflation running at 3 percent per annum.

    Thats going to mean falling sales volumes at least in the consumer market.

    Unless lots of people have gained employment who were previously out of work ? No, oh well then.

    To be honest a 0.4 percent decline sounds very optimistic to me.

    But Statistics can be dressed up any way one likes.

    Like House prices. Quote them year on year in one breath , then month by month in another, in the same article equals one slightly confused audience.


  • Comment number 89.

    Hi Stephanie

    I'm not in construction but I am renovating my house and project managing it myself. Every tradesman I deal with was grubbing around for work in the early part of the year. They are now booked up solidly until well into the new year. Many people are following the motto, "Don't move, improve."

    New house building fell off acliff at the start of the recession and is improving dramatically. I think the figures are a fair representation of reality.

  • Comment number 90.

    The answer could well be down to the government spending.
    1 work on schools and the public sector getting things done this financial year as the money is going to dry up and stop.
    2 the massive increase in affordable housing funding last year and the lead in times for that.

    The private or commercial sector is pretty dead still with some land and sites almost a liability.

  • Comment number 91.

    #87 AnotherEngineer,

    "Perhaps they are ignorant of the Great Man's prediction/hope. Who would you believe: a ranter or people putting down their own money?"

    Typical of another limited technocrat. If you care to go back over JFH's post you will find the rationale for his call for the depreciation of house prices.

  • Comment number 92.

    71. At 09:36am on 10 Dec 2010, ishkandar wrote:
    #26 >>Deviation through low correlation coefficient will tend to suggest that the 3rd quarter jump is wishful thinking.



    Run that past me again.

    Sounds like gooblygook for diasappearing up one's own A$%$%.



  • Comment number 93.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 94.

    91. At 9:48pm on 10 Dec 2010, foredeckdave wrote:
    #87 AnotherEngineer,

    "Perhaps they are ignorant of the Great Man's prediction/hope. Who would you believe: a ranter or people putting down their own money?"

    Typical of another limited technocrat. If you care to go back over JFH's post you will find the rationale for his call for the depreciation of house prices.


    Agreed.


  • Comment number 95.

    91. At 9:48pm on 10 Dec 2010, foredeckdave wrote:
    Typical of another limited technocrat. If you care to go back over JFH's post you will find the rationale for his call for the depreciation of house prices.
    ==================================
    I am well aware of the rationale - one is that pay in this country is too high because of house prices, and that wages will go down if house [rices crash. My view is that if people have lost their capital reducing their pay as well will not be popular.
    Any attempt to discuss things with him, however, just leads to a diatribe and personal insults (which are water off a duck's back having worked with the Army for many years).
    See 282 on Robert Peston's current blog for a typical example.
    I always assume that someone with a strong argument is quite happy to discuss it.


  • Comment number 96.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 97.

    Steph
    You were great tonight on Newsnight. Calm, intelligent and NOT belligerent. If you are going to do this more often, please hold on to your own style. Please, please don't adopt the cynicism of other fellow presenters (even if you feel it!!). May I suggest that Brian Walden should be the role model - intelligent, incisive and humorous.
    Ted Smith

  • Comment number 98.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 99.

    Inaccurate data can be one point, - on the issue of productivity, many organisations took the opportunity to prune staff and impose wage cuts,in effect becoming more lean. Furthermore, we see more eastern block workers on the ground, - are the statistics capturing these effects?

  • Comment number 100.

    If we want to be more scientific about this, and I think we do, then the ONS should have run both the old and new construction industry models together for at least a couple of quaters, this would have given a control for comparison. Perhaps they did before they went 'live'? If so what did the two sets of data show?

 

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