British economic growth slowed as expected in the second quarter of this year to its weakest rate in three years as private housebuilding slumped, the Office for National Statistics said.
The ONS said GDP rose by 0.2% in the three months to June, bringing the annual rate down to 1.6% from 2.3% in the first quarter.
The Bank of England is expecting the economy to slow but its ability to cut interest rates is being hampered by soaring inflation which is running at nearly double the central bank's 2% target.
The ONS said the economic slowdown in Q2 was driven by a 0.7% fall in construction output - the biggest drop since the third quarter of 2005 and the result of sharp declines in housebuilding as a decade-long housing boom swiftly reverses into a slump.
Construction output would have been even weaker, the ONS said, without a boost from government spending on infrastructure projects.
Housebuilders have announced over 4,000 job cuts in recent weeks and are likely to remain under pressure as record low mortgage approvals point to further sharp falls in house prices.
The sector only accounts for 6% of the economy but the much bigger service sector - which constitutes 74% of GDP - has also slowed dramatically in the last few quarters.
Between April and June, services sector output rose by 0.4%, putting it just 2.1% higher on the same time a year ago. That was the weakest annual growth since 1992, when the economy was emerging from the last recession.
Within services industries, however, the transport, storage and communications category showed a 2.2% jump in the quarter - the biggest rise since the second quarter of 2000.
