LONDON Construction output fell in February at the fastest pace in more than three years despite a rare pick-up in house building, a survey showed on Monday.
The Markit/CIPS Construction Purchasing Managers' Index (PMI) dropped to 46.8 - the lowest since October 2009 - sinking further below the 50 level that separates growth from contraction. The deterioration since January, when the index came in at 48.7, compares with analysts' forecasts for an improvement to 49.0.
Despite making up less than 7 percent on Britain's economy, weak construction output was the main drag on growth last year, pushing the country back into recession.
"Downward pressure on client budgets, alongside subdued public sector spending, again led to lower output levels and reduced new order inflows," said Tim Moore, senior economist at survey compiler Markit.
Civil engineering activity fell sharply and commercial work suffered a renewed decline.
However, residential building expanded for the first time since May, possibly helped by the central bank's Funding for Lending Scheme, which provides cheap funding to banks to encourage them to lend and has boosted the flow of credit for home buyers in recent months.
On balance, firms expected a rise in overall construction output over the next 12 months, citing new house-building projects as a potential driver of growth, with the degree of optimism the highest since April.
Partly reflecting those hopes, the number of people in construction work rose fractionally in February, after declining during the final three months of 2012.
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(Reporting by Olesya Dmitracova. Editing by Jeremy Gaunt)