Building activity down again after brief respite

By Joe Dermody

Monday, February 13, 2012

Construction activity has fallen at the start of 2012 following a brief period of stabilisation at the end of 2011.

The latest Ulster Bank construction purchasing managers’ index records a fall to 46.4 in January from 49.9 the previous month. Anything above 50 indicates growth. The reading signalled the fastest reduction in activity in three months.

Employment in the sector continues to fall, as it has done every month since May 2007. Against that, commercial property offered some mild signs of recovery for the first quarter of 2012.

Ulster Bank economist John Fahey said: "From a sectoral perspective, the latest results showed that housing activity fell back into contraction in January after its brief period above 50 in December. Instead, in January it was the turn of commercial activity to record an increase in activity with a reading of 51.3 — the first time the survey has indicated a rise in commercial activity since October 2007.

"The civil engineering sector continues to underperform, once again being the weakest of the three sectors, with a reading of 37.7. Indeed, this level represented an acceleration in the pace of decline, meaning civil engineering is likely to continue to lag the other two sectors over the coming months. The construction sector remains in a job shedding mode."

Housing activity decreased in January after rising the previous month. The civil engineering sector remained the worst-performing sector.

New orders decreased marginally at the start of 2012, following an increase in December. The seasonally adjusted new orders index has fluctuated around the 50 no-change mark in recent months. Where new business decreased, firms mentioned weak client confidence amid uncertain economic conditions.

Mr Fahey added: "While the contraction in overall activity accelerated in January, some of the forward-looking elements of the January survey offered some slight encouragement. Although the new orders index showed some renewed weakness in January, the decline took it to only slightly below the 50 mark, having been above 50 for two of the previous three months.

"This is consistent with the broad pattern of tentative signs of stabilisation in activity levels. In terms of industry expectations, overall, construction firms still expect activity to be higher in 12 months’ time, with the level of optimismon this scenario increasing to its highest level since last May."

This story appeared in the printed version of the Irish Examiner Monday, February 13, 2012