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Economic growth revision offers potential construction boost

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The construction sector has received a potential pre-Christmas boost with the news that Britain's economic growth is stronger than previously thought.

In its latest update, the Office for National Statistics has raised the figure for Britain's economic growth in the third quarter from 0.5 per cent to 0.6 per cent.

This is particularly good news as it covers the period immediately after the EU referendum, which means it represents the state of the economy just as investors, consumers and decision makers were absorbing the shock of the Brexit vote and starting to work out what the future might hold.

It also suggests that any Brexit-related shock might not happen, expect perhaps in the aftermath of the actual exit from the EU if the government is unable to negotiate a good trade deal.

UK economist at Capital Economics Ruth Gregory said: "The latest set of UK national accounts leave the economy looking even stronger after the referendum than previously estimated.

"GDP growth in Q3 was revised up from 0.5 per cent to 0.6 per cent and the 0.7 per cent growth rate seen in the second quarter was revised down a touch, to 0.6 per cent, suggesting that the economy didn't lose any pace following the referendum."

All of this suggests market conditions may be favourable for the construction sector, at least in the short term.

Other factors continue to appear favourable, with unemployment down to 4.8 per cent, suggesting plenty of jobs are being created in construction and elsewhere. Moreover, high employment means more people will have the funds to buy homes, potentially stimulating residential construction, while an increase in the number of people on company payrolls may stimulate the building of commercial premises.

Inflation is one fly in the ointment, having risen to 1.2 per cent, but this is still very low by historical standards and while it is eroding savings, it remains below the average level of pay increases.

Source : Jewson

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24 December 2016

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