Repairs slow construction decline

A BOOST in repair work due to the bad weather meant the decline in activity in the construction sector slowed last month.

However, activity, new orders and employment all continued to decrease during the month, according to the latest Ulster Bank Construction Purchasing Managers’ Index (PMI).

The index, which tracks changes in construction activity, remained below the 50 mark in January, posting 45.3. However, this was higher than the reading of 40.6 in December, pointing to a marked slowdown in the rate of contraction. A reading over 50 signifies growth in the industry.

Ulster Bank chief economist Simon Barry said: “The headline activity index rose by almost five points last month to leave it at its highest level since August of last year.

“This was a pattern linked to an unwind of the negative impact on activity from the extreme weather in December as some respondents reported an increase in repair work while fewer firms experienced weather-related declines.

“But despite the rise in the index, the PMI is still below the break-even level of 50 and is thus continuing to point to a sector that is mired in recession. The PMI indicates that Irish construction activity has declined in each month since June 2007.”

The slowest rate of decline was recorded in housing and while civil engineering fell at a less severe rate in January, it continues to under-perform both housing and commercial.

“The broad-based declines in the sector reflect ongoing falls in new business, though the rate of deterioration in order books eased slightly last month, helped by support from post cold-snap repair work. With new business continuing to decline, there was a further reduction in employment levels last month as the process of adjusting staffing levels to lower volumes of activity continues across the sector. Construction firms are now also facing the additional strain of higher input prices, as managers noted increasing costs for a range of raw materials, including oil and copper,” said Mr Barry.

Staffing levels at Irish construction firms fell for the 45th successive month in January, in line with falling new orders. The rate of job -shedding was substantial, despite easing to the slowest in three months, according to the PMI.

Insufficient capacity at suppliers contrasted with improved weather in January, leaving suppliers’ delivery times unchanged.

Meanwhile, a number of raw materials increased in price, with oil and copper mentioned in particular by panellists. Input cost inflation was solid and broadly in line with the rate in December.

Business sentiment improved slightly in January and reached a five-month high. Positive sentiment regarding the prospects for activity growth over the coming year partly reflected improving global economic conditions.

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