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UK's Aug construction output slumps, adding to signs of economic slowdown

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British construction output fell in a rainy August at its sharpest rate since late 2012, adding to signs that overall economic growth slowed in the third quarter, official data showed on Friday.

[LONDON] British construction output fell in a rainy August at its sharpest rate since late 2012, adding to signs that overall economic growth slowed in the third quarter, official data showed on Friday.

The Office for National Statistics also said the deficit in Britain's trade in goods narrowed in August but was larger than expected and it was also set to weigh on growth.

Britain's economy has outpaced many of other advanced nations for much of the last two years but is widely expected to have slowed in recent months along with the global economy. The Bank of England said on Thursday it was keeping interest rates at a record low of 0.5 percent.

Construction output plunged by a monthly 4.3 per cent, its biggest fall since Dec 2012, contrasting with a median forecast for growth of 1.0 per cent in a Reuters poll of economists.

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Construction makes up about 6 per cent of Britain's economy.

In the three months to August - smoothing out what is often volatile monthly data - output fell by 0.8 per cent, the biggest such decline since March 2013, the ONS said.

The expected drag from construction on gross domestic product in the July-September period contrasts with the second quarter when the sector grew by a quarterly 1.4 per cent.

An ONS official said the weak figures for construction in August may have been linked to wet weather during the month.

There might be better news ahead for the sector. An industry survey published last week showed growth in construction hit its fastest pace in six months in September, boosted by the revival of residential projects that had been put on hold earlier in the year, before May's national election.

Friday's data showed housebuilding in August fell by 3.0 per cent from July and output in other parts of the sector also contracted for the first across-the-board decline since 2010.

House prices have picked up again after a slowdown in the second half of 2014 caused by tighter mortgage lending rules.

A group representing surveyors warned this week that the recovery could be hurt by a shortage of homes available for sale. The government is seeking to stimulate new house-building.

The trade figures also released on Friday showed Britain's deficit in its trade in goods narrowed to £11.149 billion in August compared with £12.203 billion in July. Including Britain' surplus in services, the overall deficit fell to £3.268 billion.

Britain's trade deficit narrowed sharply between April and June, boosting economic growth in the period. But economists have said the improvement is unlikely to last given signs of a slowdown in the global economy and a strengthening of sterling in recent months.

The ONS said on Friday that the combined goods trade deficit for July and August already stood at double the shortfall for the second quarter as a whole.

REUTERS

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