The rate of growth in construction activity fell sharply in February, according to the latest Ulster Bank construction Purchasing Managers index.

The monthly survey, which gives an indication of activity, employment and sentiment from key managers in the sector, had been showing rapid expansion.

While the sector is still growing, according to February's figure, it is growing at a much slower pace than in recent months. 

The index showed a reading of 52 for last month, down from 57.1 in January. 

Ulster Bank noted that the February growth in activity was the weakest in the current 18-month sequence of growth.

The Central Bank cap on mortgage lending and the phasing out of capital gains tax relief for property investors - both of which are seen as having cooled demand - are seen as the main reasons for the slowdown.

The recent weakness of the euro also contributed to the strongest rise in input prices since 2008. 

Mixed trends were recorded across the three monitored sectors - commercial, civil engineering and housing - last month.

Ulster Bank said that activity in the commercial sector rose at a solid pace, however the rate of growth was weaker than in January.

Work on civil engineering projects decreased for the first time since last September, while activity in the the housing element of the index stagnated.

A weaker rise in the employment was also reported in February, with the rate of job creation the slowest since last June. 

Business sentiment eased to its weakest level in 16 months, but remained positive as 59% of companies surveyed for the index predicted a rise in activity over the next 12 months.

Commenting on today's index, Ulster Bank's chief economist Simon Barry said the detail behind the figures paint a disappointing picture with weaker activity patterns were reported across all three main subsectors. 

Mr Barry said that housing activity stagnated last month, a marked turnaround from the record rates of expansion recorded as recently as September of last year. 

He said some of this weakness could be linked to higher levels of uncertainty surrounding the housing market outlook related to the new Central Bank mortgage lending regulations.  

"However, the weakness emerging in the past couple of months has extended beyond housing. Activity has also softened materially in both commercial and civil engineering which should not be as directly-affected by the Central Bank measures, thus pointing to more broadly-based weakness," he said. 

"Overall, while Irish construction remains in recovery mode, it is clear that the sector’s recovery dynamic has weakened considerably in the early part of this year," the economist concluded.