Slowdown in building job losses

THE pace of job cuts in the construction sector has started to slow, although latest figures show there is still a sharp deterioration in business conditions.

The latest Ulster Bank purchasing managers index (PMI) shows activity, new orders and employment fell steeply last month, while input costs decreased at the second-fastest pace in the series history.

The index dropped to 31.1 in May, from 32.9 in April, index readings above 50 signal a positive performance.

The index stood at 33.9 in May last year and at 50.7 in May 2007.

Activity in the sector has now decreased throughout the past two years, reflecting weakness in the wider Irish economy.

The index said jobs continued to be cut at a “substantial rate”, extending the current period of decline to 25, although the pace of reduction moderated to its weakest so far in 2009.

Ulster Bank economist Lynsey Clemenger said that considering the rate of decline in construction activity slowed notably in April, some payback was not that surprising in May.

“All three components remain off their low points, and we maintain our view that the worst has passed, even though activity continues to contract.

“Looking at three-month moving averages, which provide a better indication of the underlying trends, we see the slowest pace of contraction in housing since October 2007 and in commercial since October 2008. However, the decline in civil activity accelerated from last month.”

Despite rising to its highest since May 2008, sentiment in the sector remained negative. New order levels are expected to remain weak as the wider economic downturn continues, leading to further reductions in activity over the next twelve months.

“While continuing to point to strong falls, the new orders index was at its highest level since April 2008. This encouraging development has fed through to constructor’s sentiment, which, while still negative, was the highest in a year.

“Despite the continued decrease in input prices, the poor economic outlook means activity will remain very subdued well into next year,” said Ms Clemenger.

Each of the three broad sectors monitored by the survey saw their respective rates of activity contraction accelerate in May.

The steepest overall reduction was again in the residential category, while activity on commercial and civil engineering projects also fell substantially.