Construction activity falls again

ALL areas of the Irish construction sector are in decline, with a particularly steep reduction in civil engineering activity.

The Ulster Bank Construction Purchasing Managers’ Index data shows that job cuts have increased and that business is contracting at steeper rates than earlier in the year.

However, modest optimism regarding future prospects for activity was recorded by the index which was at its most positive since February 2008. Optimism largely reflected an expectation that the housing market would stabilise over the coming year.

Commenting on the survey,Ulster Bank chief economist in Ireland Simon Barry said: “The latest reading of the Ulster Bank Construction PMI was somewhat disappointing, with the headline index pointing to renewed weakness in the construction sector in September. The deterioration in the month was broad-based.

“The housing index of activity fell back relative to its August level and the declines in the commercial and civil engineering indexes were even greater.

“Overall, the construction PMI remains well off the record lows seen earlier in the year, but the downside surprise in the latest reading serves to highlight the ongoing contraction.”

Mr Barry said that jobs in the sector clearly remain under pressure, as the employment index slipped back to a four-month low in September.

“One relative bright spot again this month was the ongoingimprovement in the expectations index. This measure of confidence among constructors has been above the key 50 mark for four months running, and rose to its highest level since February 2008 in September.

“Thus, while the sector continues to experience pronounced weakness at present, survey respondents continue to believe that the construction environment will be improving as they look 12 months ahead,” he said.

The data shows that civil engineering was the worst-performing of the three monitored areas during September. The decline in activity in the category was severe, and the fastest since June.

Housing activity decreased for the 35th consecutive month.

Despite registering the weakest decline of the three categories in September, commercial activity still fell at the steepest pace in four months.

“New business also fell in September, extending the current period of decline to 30 months. Anecdotal evidence suggested that clients remained cautious in committing to new projects given the fragility of the wider economic climate,” the reports authors said.