Rate of decline in construction slows

THE rate of contraction in construction activity eased again in March, but the level of under-performance in the sector remained sharp.

March data from the Ulster Bank Construction Purchasing Managers’ Index (PMI) demonstrated a further slowing in the pace of deterioration of business conditions in Irish construction.

That easing reflected weaker falls in activity, new orders and employment, according to the PMI. Ulster Bank said yesterday that despite the improvement “the respective rates of decline for these series were still marked”.

The Ulster Bank Construction PMI – designed to track changes in total construction activity – rose to 42.3 in March, from 40.4 in the previous month.

Any reading under 50 shows the sector is still in decline.

Wile the reading signalled a further sharp fall in activity, it was the weakest such fall since October 2007.

Commenting on the survey, Simon Barry, chief economist Republic of Ireland at Ulster Bank, said latest reading in the series “indicates that activity in the Irish construction sector contracted for the 34th consecutive month in March”.

In effect it highlights “what a torrid time the sector has been having for most of the past three years”.

Mr Barry pointed out that the March reading of the headline PMI at 42.3 was still well below the expansion threshold of 50, “thus clearly pointing to ongoing falls in activity”. Still the PMI managed to rise for the third month in a row and the March level is the highest reading in almost two and a half years, he said.

While the construction sector is lagging behind manufacturing and services, which are both now in the process of stabilising, “at least the rate of contraction does look to be easing back,” he said.

“A similar pattern is evident in the new orders index which also rose to a two -and-a-half-year high in March, offering some hope that the pace of decline in activity can continue to ease in the months ahead,” he added. Construction firms also continue to believe that the sector will show signs of recovery as they look one year ahead, with the future expectations index above 50 for the third consecutive month, he said.

“With incoming new business still falling, the sector is still very much in job- shedding mode.”

There was a steep decline in the level of civil engineering activity.

Each of the three broad sectors monitored by the survey posted lower activity in March, although in each case the rate of decline had slowed since February. The steepest fall was recorded in civil engineering, where activity fell for the 28th consecutive month.

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