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Analysts have warned that the 0.6% drop in construction output unveiled today may foreshadow longer-term shrinkage across the industry.

James Hastings, head of construction futures at Experian鈥檚 business strategies division, predicted the sector would contract further over the next quarter.

鈥淲e could be looking at something like a 5% decrease, quarter on quarter, in the fourth quarter of the year,鈥� he said.

He added: 鈥淎ll we have at the moment is a headline figure for construction. My feeling would be that if one were to deconstruct that, what we鈥檙e starting to see now is the beginning of the steep fall that we鈥檙e all expecting in sectors like public housing.

鈥淭he legacy programmes left, like 好色先生TV Schools for the Future, are starting to complete and there鈥檚 just not anything like that much education work coming into the pipeline.鈥�

Kelly Forrest, senior economist at the Construction Products Association, said she expects the 0.6% GDP figure to be revised downwards when September鈥檚 data becomes fully available.

She said: 鈥淐uts to public sector capital budgets are now having a tangible impact on workload. These cuts coupled to the hiatus in PFI work and a faltering private sector mean that the near-term outlook for the construction industry is very poor. Following the publication of the association鈥檚 own forecasts last week we expect construction output to contract by 1.1% in 2011, a further 3.6% next year, with no growth anticipated before 2014.鈥�  

Industry commentator Brian Green offered a more optimistic analysis, noting that previous quarters have seen preliminary GDP figures revised upwards.

鈥淢y gut instinct is that the figure might be revised to be a smaller drop鈥�, he said.

However, he echoed fears that the construction sector will fall into recession once public sector work is fully exposed to the impact of government cuts.