The British economy may have contracted at a much sharper rate than previously thought in the first three months of this year, official statisticians said, after major revisions to construction output figures.
New data from the Office for National Statistics on Friday showed construction output fell 9.0 percent in the first quarter, the steepest fall since 1963 and much worse than the 2.4 percent decline previously estimated.
The ONS said that was likely to knock 0.3 percentage points off first-quarter gross domestic product, already estimated to have contracted by 1.9 percent in the three months to March, which was the steepest decline since 1979.
"If there were to be a significant upward counterweight to the construction figures, we may well have had it by now. We may well be in for a downward revision to the prevailing Q1 figure," said Philip Shaw, economist at Investec.
If none of the other GDP components were revised, the change in construction output would push the fall in GDP down to 2.2 percent, still a 30-year low, the ONS said.
The economic downturn has dealt a heavy blow to the construction sector, which accounts for some 6 percent of Britain's economy.
Friday's data, revised back to 1955, showed housing construction output fell by 10 percent in the first quarter, with new work down 8 percent.
Non-housing construction output slumped 21 percent on the quarter but infrastructure output was up 2 percent.
However, recent surveys suggest the pace of decline may be slowing, helped by government spending and signs of improvement in the housing market.
"Recent modestly but steadily increasing housing market activity – and increased optimism about the outlook – is starting to feed through to support housebuilding activity," said Howard Archer, economist at IHS Global Insight.
Construction firms have laid off thousands of workers during the recession but some signs are also emerging from within the industry that conditions might be starting to improve.
Housebuilder Bellway <BWY.L> said on Friday it was looking to buy land and reopen sites.
"We might have hit the bottom here," Chief Executive John Watson told Reuters. [ID:nL4674610]
PRICE PRESSURES EASING
Separate figures published by the ONS showed price pressures at the start of the inflation pipeline continued to abate as the economic downturn persists, with oil and metals prices falling at a record annual rate.
Input prices fell 9.4 percent on the year in May, the steepest annual decline since November 2001, and lower than analysts' forecasts for a fall of 8.3 percent.
Oil and imported metals prices fell by 42.2 percent and 15.5 percent on the year respectively.
Factory gate inflation weakened broadly in line with expectations, suggesting that weak demand is preventing firms from putting up prices.
The Bank of England forecasts inflation will remain well below its 2 percent target over the next couple of years, and has slashed borrowing costs to a record low of 0.5 percent and been pumping money into the economy to ward off deflation.
"The figures add to the evidence that price pressures in the UK economy are set to subside further and that, in the foreseeable future, excessively low inflation or even deflation remains a bigger concern than the threat of a sharp pick-up in inflation," said Jonathan Loynes, chief European economist at Capital Economics.
