A sharp fall in building activity was seen in December, according to the latest survey on the sector. Ulster Bank's Construction Purchasing Managers Index fell to 35.7, the lowest level since the survey was started in June 2000. The index had stood at 42 in November.
Ulster Bank said the substantial decline in activity was blamed on the conclusion of existing projects and a lack of new work to replace them. A reading above 50 signals an increase in activity, while a reading below 50 signals a decrease.
Pat McArdle, Ulster Bank's chief economist, said that house completions are declining at record rates. As housing makes up two thirds of the industry, this dragged overall construction activity into negative territory, he added. The housing index fell from 24 in November to 23.5 in December.
However, he said that December was unusual as the two other components of the industry - commercial and civil - also contracted.
'Commercial activity has been teetering for some time but is now recording a significant decline,' the economist said. 'This has happened sooner than expected given that a good number of high profile projects have yet to complete'. The commercial index fell to 45.6 from 49.2.
He said that the fall in civil engineering activity is surprising as the National Development Plan was maintained in the recent Budget. This index fell from 53.5 to 45.4 last month.
New orders fell last month for the nine month in a row, reflecting a deterioration in demand, Ulster Bank said. In line with the trend in new orders and activity, employment at building firms fell at a survey record rate. Staffing levels have now fallen each month since May.
The December data showed a marked degree of pessimism among Irish construction firms, with more than 36% of firms expecting activity to be lower at the end of 2008 due to a shortage of new work and tight credit conditions.
Meanwhile, new figures from the Central Statistics Office show that employment in construction firms fell by 5.4% in November 2007 compared with November 2006.
The CSO said that the monthly employment index decreased from 105.4 to 99.7 in November.
