The construction industry continued to contract in December, but there were signs that the decline eased as activity, new orders and employment fell at weaker rates.

Improved sentiment was also recorded, with companies expecting improving economic conditions and a stabilisation over the coming year

The Ulster Bank Construction Purchasing Managers index stood at 43 in December, up from 42.6 in November. December saw the weakest rate of decline in May 2012. 

Any figure below 50 signals contraction in an industry, while a figure over 50 signals growth.

2012 was the sixth year in a row of contraction in the construction sector, Ulster Bank noted.

Ulster Bank said that all three monitored sectors saw weaker falls in activity in December compared to November. The residential sector remained the best performing, with that sub-index moving up to 45.8 from 44.2. The pace of decline in commercial activity also slowed with its sub-index improving to 41.3 from 39.8.

But civil engineering activity continued to be the weakest sector and its sub-index stood at 35.2 in December, although this was an improvement from the November reading of 31.1.

Ulster Bank said that December's reading points to an ongoing and broad-based declines in construction, as activity continues to slide across the three main sub-sectors - residential, commercial and civil engineering.

The bank's chief economist Simon Barry said that the construction sector continued to face an extremely challenging environment in 2012, with last year marking the sixth year in a row of contraction.

''One disappointing aspect of the sector's performance in 2012 was that the hoped-for stabilisation failed to materialise, and the industry continues to be dogged by recessionary conditions, including persisting falls in new work orders and employment levels,'' Mr Barry said.

He said that the December survey shows that new incoming business levels continue to decline, so it does not appear that any such improvement is likely to happen in the early part of 2013 at least.