Housing ‘remains the weakest link’

House building is now the weakest element of the construction sector which has continued to contract — cutting jobs every month over the last five years.

The latest Ulster Bank Construction Purchasing Managers’ Index reveals that housing is now the weakest of the three construction sub-sectors, with commercial and civil engineering also continuing to register ongoing declines.

The seasonally adjusted index, designed to track changes in total construction activity, fell to 45.4 in April, from 46.7 in March, to signal an acceleration in the rate of contraction in activity — the sharpest fall since last October.

Ulster Bank chief economist Republic of Ireland Simon Barry said the April Ulster Bank Construction PMI confirms that construction remains among the weakest sectors of the Irish economy as it entered the second quarter of 2012.

“While the latest PMIs for manufacturing and services point to expanding activity levels in those internationally traded sectors, the domestic-facing construction sector continues to contract. Indeed, the pace of decline in construction accelerated in April to its sharpest pace since last October. Weakness early in the second quarter has been particularly notable in the housing sector which contracted at its fastest pace since September of last year,” he said.

Mr Barry said the falls in activity levels across the sector reflect a scarcity of new business, as new orders continue to decline.

“While the falls in new business levels have become much less severe in recent months compared to earlier in the downturn, the persistent declines in workloads have resulted in further job cuts, extending the period of falling employment in the sector to five years.

“Looking a year ahead, construction firms continue to expect some increase in activity levels. However, positive sentiment fell markedly in April — to its lowest level since October last year — highlighting the fragility of confidence in the sector,” he added.

The survey found that after stabilising in March, new orders decreased modestly in April amid reports of fragile client confidence.

“As workloads decreased, Irish construction firms lowered their staffing levels accordingly. Employment has fallen in each month throughout the past five years. The latest reduction in staffing levels was solid, and quickened fractionally from that recorded in March,” the survey indicates.

The index indicates that a lack of confidence among clients fed through to constructors in April as optimism regarding the year ahead declined markedly.

“The level of sentiment was the lowest since October 2011,” the survey found.

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