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Construction falls to lowest level since Dec 2009

The PMI index sank to 48.2 from 54.4 in May, its lowest reading in two and a half years

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Construction activity shrank at its fastest pace in June since December 2009, new data showed on Tuesday, adding greater pressure on the government to boost growth.

Underlying business conditions worsened and an extra public holiday hit output, the Markit/CIPS construction purchasing managers' index (PMI) showed.

The data will make grim reading for the government and Bank of England who are facing increasing calls to act on the economy that slipped into its second recession in four years.

The PMI index sank to 48.2 from 54.4 in May, its lowest reading in two and a half years and falling below the 50 level which separates growth from contraction. It missed forecasts for a more modest fall to 53.0.

"The UK construction sector moved back into reverse gear in June with output falling at its fastest pace since the end of 2009," said Tim Moore, senior economist at data compiler Markit.

The data comes the day after figures showed the manufacturing sector contracted for the second consecutive month in June and ahead of a Wednesday release that is expected to show only tepid growth in the dominant service sector.

With economists seeing marginal growth ahead at best, and only a mild improvement next quarter from London's hosting of the Olympic Games, the Bank of England is widely seen restarting its quantitative easing asset purchase programme.

The Bank is expected to top up the £325 billion of cash it has already pumped into markets with another £50 billion when it meets on Thursday as falling inflation gives it more scope to support the battered economy.

Cost pressures eased markedly, Markit said, giving the central bank more room to manoeuvre as increased costs for energy and raw materials were offset by lower fuel prices.

Markit said respondents cited uncertainties about the economic outlook, as well as disruptions from the extra holiday to celebrate the Queen's Diamond Jubilee and severe weather across large parts of the country, as reasons for the decline in activity.


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