Commenting on the Q3 GDP data released this morning, Simon Rubinsohn, RICS Chief Economist said: “Q3 GDP data released this morning provided another positive surprise (following the unexpectedly strong outturn for Q2).
“A key driver of the recovery according to the official numbers is the construction sector where output rose by a further 4% over the past three months and is now just 2% away from its all time high (Q1 2008). Indeed, over the past two quarters construction output has been responsible for not far short of half of the increase in GDP.
“Despite this, we are not entirely convinced of the strength of the recovery in the sector. Other official data relating to construction is sending more mixed signals.
“Housing starts remain way down on previous highs, meanwhile the construction orders numbers have fallen away sharply. In addition, most sentiment surveys of the sector including the RICS and CIPS reports are certainly not picking up such a robust performance.
“The better than expected Q3 figure is likely to discourage other members of the MPC from joining Adam Posen is supporting a new round of quantitative easing for time being.
“Even so, we still have concerns over how well the economy will be able to withstand the bombardment inflicted by both public spending cuts and higher taxes and would not rule out the possibility that further monetary accommodation will at some point be necessary to sustain the recovery.”