UK economic growth slowed in the first quarter of 2018, with GDP down to 1.2%, both services and construction reducing output affecting headline figures. This was weaker than expected and has led to a reduction in overall forecast output to 1.4% from 1.8% in 2018.
The Consumer Price Index (CPI) measure of inflation reduced to 2.4% in April down from 2.5% in March. There is still upward pressure on inflation as the pass through of higher fuel oils has not yet registered. The Retail Price Index (RPI) measure of inflation conversely rose marginly to 3.4%. Interest rates remained on hold at 0.5% in May with the mooted rate rise scuppered by the lacklustre growth data for the first quarter. Interest rates are now not expected to rise until the end of the year.
Construction Output and Regional Differences
The Construction Products Association (CPA) latest forecast is anticipating zero growth in 2018. A rise in private housing and infrastructure activity is likely to be offset by a slowdown in work across commercial, industrial and health sectors. Private housing is forecast to grow 2% per annum to 2019 and infrastructure by 6.4% in 2018 and 13.1% in 2019. In contrast commercial offices are predicted to fall 20% this year and 10% in 2019. Over 2017 we found the following changes in output:
• Construction market outputs in the North West rose 19%, the South West up 17%, North East up 16% and East Midlands up 13%.
• Growth was also strong in Yorkshire and Humber up 10%, West Midlands up 8%, South East up 8%, East of England and Wales both up 6%.
• In contrast, construction output in London fell by 6% and by 3% in Scotland. In London, the decline was due to a drop in commercial office work, although the residential and infrastructure sectors remain more upbeat. Our regional tender price forecasts reflect these differences.
In London, the decline was due to a drop in commercial office work, although the residential and infrastructure sectors remain more upbeat.
Our regional tender price forecasts reflect these differences.