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Construction activity recovers slightly in July


The latest data offers a reprieve after manufacturing fell at its fastest pace in three years last month

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Construction activity recovered last month after shrinking at its fastest rate in two and a half years in June, new data showed on Thursday.

The data will be broadly welcomed after new research showed on Wednesday that manufacturing had contracted at its fastest pace in three years.

The Markit/CIPS construction PMI recovered to 50.9 in July from 48.2 in June, beating economists' expectations of a further decline to 48.0.

New orders recorded their second-biggest drop since January 2010, but the fall was less steep than in June, and the decline did not stop confidence about the year ahead rising to a three-month high. Builders said they were more positive about the next year despite a fall in orders.

"Some construction firms are expecting, or at least hoping, that the sector will receive a shot in the arm during the next 12 months," said survey author Tim Moore.

The economy entered its second recession in four years at the end of last year, with a slump in construction driving a 0.7 percent contraction in the second quarter, when one-off effects compounded problems caused by the euro zone debt crisis and government austerity.

Since then the Bank of England has expanded its gilt purchase programme by £50 billion, the government has taken steps to encourage banks to lend to businesses and homebuyers, and business secretary Vince Cable has argued for specific measures to boost house-building.

However, economists may be cautious about reading directly across from the PMI data to stronger gross domestic product data, as official construction data this year has recorded much sharper falls in output than suggested by the PMI.

Moore stressed that Thursday's figures - which come hours before the Bank announces its August policy decision - did not point to anything more than anaemic growth.

"July's survey offered little sign of an imminent rebound in the UK construction sector, with total activity rising only marginally after well documented temporary factors had weighed on output last month," he said.

Commercial activity was the only construction sector to show growth, with a contraction in civil engineering and broadly stable home building.

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