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U.K. Construction Expands at Slowest Pace in Eight Months

U.K. construction grew at the slowest pace in eight months in August as demand weakened and homebuilding contracted further.

A gauge of building activity based on a survey of purchasing managers slipped to 52.6 from 53.5 in July, Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply said today in a report in London. A reading above 50 indicates expansion. A measure of new orders fell to the lowest since January.

The deepest government spending cuts since World War II and banks’ rationing of credit are weighing on consumer confidence and the housing market. A separate report today from the Office for National Statistics showed new construction orders plunged 16 percent in the second quarter to the lowest level since 1980.

“Reality is continuing to bite in the U.K. construction sector, as worries over wider economic conditions contribute to a slower rate of output growth,” CIPS Chief Executive Officer David Noble said in a statement. “Though overall activity is still in growth territory, there may be some question about whether this will continue for much longer.”

Commercial building strengthened in August, while growth slowed in civil engineering, Markit said. Housing continued to shrink. The report also showed that confidence among construction executives was at its lowest in eight months.

The Markit report also showed that input-cost inflation for builders was at a three-month high due to increased prices for fuel and raw materials.

‘Slightly Lower’

Marshalls Plc, the U.K.’s largest maker of natural stone and concrete landscaping products, said on Aug. 26 that it expected trading volumes to be “slightly lower” in the second half compared with a year earlier as demand from government-related clients in Britain falls.

U.K. manufacturing shrank the most in more than two years in August as demand from domestic and overseas customers weakened, according to a report yesterday by Markit and CIPS. A survey due to be published on Sept. 5 will show services growth slowed, according to the median forecast of eight economists in a Bloomberg survey.

As the economic recovery shows signs of faltering, Bank of England policy makers will keep their benchmark interest rate at a record low of 0.5 percent on Sept. 8, according to all 40 economists in a Bloomberg survey. Officials will also keep their bond plan at 200 billion pounds ($324 billion), said all 26 economists in a separate poll.

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