October 10, 2014 / 8:42 AM / 5 years ago

UK construction output slumps in August, lower imports help trade gap

LONDON (Reuters) - British construction fell sharply in August, hit by a fall in house-building and adding to signs of a slowdown in other areas of the economy, official figures showed on Friday.

An industrial crane sits next to an apartment block under construction at Chelsea Wharf in London September 21, 2014. REUTERS/Kevin Coombs

Separate data showed Britain’s goods trade deficit narrowed in August but only because imports fell more sharply than exports.

Construction output slid 3.9 percent on the month and fell year-on-year for the first time since May 2013, by 0.3 percent, the Office for National Statistics said.

It revised July output to a 1.9 percent rise on the month, from an original estimate of no change.

The biggest drag on the August headline figure came from a fall in house-building which was down 5.5 percent from July. Infrastructure and commercial building also fell.

Data earlier this week showed industrial production was flat in August compared with July, adding to signs that the pace of Britain’s economic recovery may have slowed in the third quarter from growth of 0.9 percent in the second quarter.

Friday’s figures contrast with a Markit purchasing managers’ survey last week which showed that the construction sector grew at one of the fastest rates on record in September.

“Whether we trust the numbers or not, it is what it is and this will affect GDP,” said Alan Clarke, an economist with Scotiabank in London. “Depending on the scale of the bounce next month, this could subtract around 0.1 percentage point from overall GDP growth.”

Britain’s deficit in its trade in goods narrowed in August to 9.099 billion pounds from a revised 10.414 billion pounds in July, which was the biggest on record.

August’s deficit was the narrowest since April, the ONS also said on Friday.   

Economists in a Reuters poll had forecast a gap of 9.6 billion pounds.  

Including Britain’s surplus in its trade in services, the overall trade deficit narrowed to 1.917 billion pounds from 3.079 billion pounds in July.

The improvement in the headline figures was tempered by signs of continued weakness in Britain’s trade performance.

Volumes of goods exports fell 2.3 percent while imports were down 6.2 percent, largely due to erratic goods as well as chemicals and oil, the ONS said.

Economists said the trade weakness added to signs that the British economy would struggle to keep up its pace in the July-September period.

“If the volume of exports and imports then held steady in September, net trade would probably be a drag on growth in the third quarter,” said Paul Hollingsworth, an economist with consultancy Capital Economics.

A sharp slowdown in growth in the euro zone economies, Britain’s main trading partners, has added to the challenge of boosting the country’s exporters and putting Britain’s economic recovery on a sounder footing.

Exports by Germany suffered their biggest slump in August since the financial crisis, data showed on Thursday, raising concerns about the risk of a new recession in the single currency area. British goods exports to the European Union fell by 0.6 percent in August from July to their lowest level since February. Imports from the EU fell by 1.2 percent.

GRAPHIC: UK trade balance since 1970 r.reuters.com/tet78s

Writing by William Schomberg; Editing by Susan Fenton

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