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UK construction output up 4 percent year-on-year in August as home-building grows

LONDON (Reuters) - British construction output edged down in August from July but rose a yearly 4 percent as home-building picked up, suggesting government programmes are boosting the supply of new houses.

The Office for National Statistics also revised up July's output in the construction sector, keeping the sector on track to show growth in the third quarter.

The government launched this week a mortgage guarantee scheme that it says will encourage more house building by making it easier for aspiring home buyers to get financing. But critics say all it will do is lift house prices.

Friday's data showed new private housing work rose 1.6 percent in August from July while other categories of construction such as new public work and private repairs fell, weighing on the headline monthly number.

There was no geographic breakdown for private housing in August but ONS data released earlier this week showed growth in new housing orders in London more than tripled in the second quarter compared with the first three months of the year.

House prices in London have jumped about 10 percent over the past year, according to previous data.

Output in the construction sector has been volatile but Friday's data showed year-on-year growth for a third month in a row, the first time that has happened since May 2011, also boosted by home-building, the ONS said.

The yearly 4 percent growth in output was the strongest since December 2011.

Construction output grew 1.9 percent in the second quarter from the first three months of the year.

A private sector survey last week suggested that growth in the sector was stronger in the third quarter. The Markit/CIPS construction purchasing managers index hit a near six-year peak in August before slowing slightly in September.

Construction contracted sharply after the financial crisis but has benefited in recent months from a healing economy and government initiatives to inject life into the housing market, such as the Help to Buy and Funding for Lending programmes.

Construction accounts for about 6 percent of British gross domestic product and remains nearly 15 percent smaller than before the financial crisis.

Economists expect Britain's overall economy picked up speed in the third quarter even though data on Wednesday showed industrial output suffered an unexpected fall in August as factories cut production. (Reporting by Olesya Dmitracova and William Schomberg)