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British construction activity falls in May

Construction activity in the United Kingdom fell by the most in May since the index was started 11 years ago, an industry group reported Tuesday.

The report is yet more bad news about the British economy, which has slowed under the pressure of rising fuel prices and falling house prices. The Bank of England reported last week that the number of home mortgages approved in April was the lowest in 15 years.

With inflation remaining stubbornly high despite the slowdown, the Bank of England is widely expected to keep its base interest rate at 5.0 percent when it makes its monthly announcement on Thursday.

House construction dropped sharply between April and May, the Chartered Institute of Purchasing and Supply said, with the monthly index dropping to 32.7 from 40.3.

Commercial construction also declined, while civil engineering activity increased in May, the report said.

"Purchasing managers saw overall activity levels in the UK construction industry decline at the sharpest pace since the PMI survey began in April 1997, with the housing sector worst hit by the effects of the credit crunch," said Roy Ayliffe, director of professional practice at the institute.

"May data for the sector heralded a further, more marked, contraction in levels of new business and, notably, the use of subcontractors fell at the fastest rate in survey history, as demand for their services continued to wane."

The Purchasing Managers' Index is based on a weighted average of five factors including output, new orders, suppliers' delivery times, stocks of items purchased and employment. An index of 50 means no change from the previous month, and a lower number indicates a drop in activity.

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On the Net:

Charter Institute, http://www.cips.org