Slowest reduction in construction activity since May

Monday 11 February 2013 16.40
Ulster Bank Construction Purchasing Managers index showed a reading of 45.8 in January
Ulster Bank Construction Purchasing Managers index showed a reading of 45.8 in January

A new survey on the Irish construction industry shows the weakest decline in activity since last May.

The Ulster Bank Construction Purchasing Managers index showed a reading of 45.8 in January compared to a reading of 43 in December.

Any figure under 50 signals contraction in a sector, while over 50 signals growth.

Ulster Bank said that the rate of decline in activity, new orders and employment all eased last month and business sentiment improved.

The index tracks the housing, commercial and civil engineering sectors. It noted slower reductions in both residential and commercial projects in January, with the fall in housing activity the weakest in a year.

But the rate of contraction in civil engineering activity accelerated and was much faster than that seen for for overall construction activity.

Ulster Bank said that new business in the construction sector decreased at a slower pace in January as clients are still reluctant to commit to new projects.

Lower workloads led building companies to cut their workforces again last month, but the rate of cuts slowed and the weakest in 11 months. The bank pointed out that staff levels have fallen every month since May 2007.

The index showed that although input prices rose again in January on the back of higher energy and fuel costs, the rate of cost inflation slowed and was much weaker than the series average.

Optimism at construction firms improved at the start of the year, and was the strongest since last June. Improved sentiment was linked to predictions of improving economic conditions.

''The first reading of 2013 of the Ulster Bank Construction PMI indicates that the rate of deterioration in business conditions in the sector has eased slightly so far this year,'' commented Ulster Bank's chief economist Simon Barry.

He noted that less negative trends were evident in the housing sector and in commercial construction.

'However, civil engineering remains the weakest sub-sector, with the January survey picking up an acceleration in the rate of contraction in activity. A weak start to the year for Exchequer capital spending is probably a contributory factor here,'' he added.