Orders and output in UK construction statistics: new methodology and old problems

Abstract

The Office for National Statistics in the UK has developed and adopted a new method for collecting and publishing construction statistics. The analysis of the revised construction new orders series and the associated new UK Department for Business, Innovation and Skills (BIS) output price index for all new construction leads to three conclusions: (1) the new indices have corrected two significant methodological errors, namely the underestimation of the number of main contractors and the underestimation of inflation by BIS output price indices for new construction; (2) the new indices addressed a concern, the orders–output ‘credibility gap’, in the construction output forecasting literature; and (3) care should be taken when using the revised orders series and new output price index for historic research because a ‘credibility gap’ exists between the two back series prior to 1990.

Keywords:

• Construction new orders
• construction output
• construction statistics
• construction output price index
• construction output forecasting

Notes

1. See the webpage of the BIS Construction Statistics and Economics Unit: http://www.bis.gov.uk/policies/business-sectors/construction/construction-statistics/price-and-cost.

2. See minutes of the meeting of 3 December 2009 of the BIS Consultative Committee on Construction Industry Statistics: http://www.bis.gov.uk/policies/business-sectors/construction/construction-statistics/cccis. See also van den Brink and Anagobso (2010).

3. For businesses with fewer than 20 full-time equivalent employees in the construction industry (Section F of the SIC 2007), the IDBR-based order surveys sample the whole population in IDBR but only require those that have operated as main contractors to report the value of their main contracts received.

4. Speculative builders also fall into the category of main contractors.

5. BAF covered businesses which were classed under division 45 of the SIC 2003. For comparison, ONS (2010a) categorizes the businesses in BAF according to the SIC 2007.

6. The estimate is based on the Business Register and Employment Survey 2009 (Office for National Statistics 2010a: 002).

7. See below.

8. The DTI implicit deflator displays seasonality because the DTI constant price series was available only in seasonally adjusted format, whereas the ONS provides constant price series both before and after seasonal adjustment.