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Manufacturing breaks records as construction slumps

The construction sector started the year in recession as commercial building work slumped and private housebuilding slowed, while manufacturing has had its longest run of growth since records began, official data has confirmed.
In January output fell sharply in the sector, dropping by 3.4pc compared to the previous month. That was the largest monthly fall in output since June 2012.
The Office for National Statistics (ONS) data was in line with other survey findings from the beginning of the year, which showed the construction sector had reported its lowest rate of growth in four months.
The IHS Markit survey for January showed a fall in building activity in the private residential sector. Previously, this had been the only consistent bright spot in a struggling industry, in part supported by the Government’s Help to Buy programme.
Ole Black, of the ONS, said that construction continued to be a weak area for the UK economy “with a big drop in commercial developments, along with a slowdown in house building after its very strong end to last year”.
However, more recent separate survey data, gathered after January, the period covered by Friday’s ONS publication, hinted that the sector might be recovering. Overall the construction Purchasing Managers Index (PMI) rose from 50.2 to 51.4 in February, the first rise in three months and a faster acceleration than economists had expected.
The survey also showed that jobs were being created in the sector and that there was modest improvement in both commercial and residential building rates. But there were also indications of hold-ups within supply chains that could act as a brake on growth.
The ONS said that despite fall in new work coming into the sector towards the end of 2017, new orders were still at a relatively high level. For the full year, 2017 marked the highest total value of new orders since 2008, in part thanks for mega rail project HS2.
Separately, ONS data on production industries, including manufacturing offered some positive signs for the economy.
Manufacturing recorded its ninth consecutive month of growth in January. That is the longest run of growth since records began in February 1968.
Manufacturing breaks records as construction slumps

Manufacturing has had its best run since 1968 when records began

Credit:
ONS
However, the rate of expansion had slowed. Output in the sector had increased by just 0.1pc in January. In the three months to January, manufacturing output remained 0.3pc below its pre-financial crisis peak.
Paul Hollingsworth, of Capital Economics, said that the sector remained strong by past standards. The data for January was “disappointing”, he added, but survey measures suggest the economy should “maintain” the same pace as the last three months of 2017. Economist Howard Archer of EY Item Club agreed, that 0.4pc growth ought to continue for the three months to March.
Mr Hollingsworth said that would mean GDP growth would still be in line for close to 2pc in 2018, as inflation falls and real wages start to pick up.
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