Pace of decline in construction slows

The construction sector remains weak although the pace of decline is slowing, the latest Ulster Bank Construction purchasing managers’ index (PMI) shows.

The Index was 42.6 in October, up from 41.9 in September, but the overall reading is deep in recessionary territory.

The three sub categories which make up the index — housing, commercial, and civil engineering — all showed falling activity.

“The latest survey results confirm that widespread weakness remains a feature of the Irish construction landscape, with large-scale declines still evident across housing, commercial and, especially, civil engineering sub-sectors,” said Ulster Bank chief economist Simon Barry.

“New orders continued to decline in October so activity and employment trends are not likely to show much improvement in the near-term. Adding to the woes of the sector, firms also reported rising input costs for the third consecutive month reflecting higher energy and fuel costs as well as some upward pressure on import costs from recent euro weakness.

“A paucity of new business and rising cost pressures looks to be impacting on confidence among respondents as they look ahead, with sentiment falling to its lowest level in two years last month.”

Almost one-in-five of the firms covered reduced employment in October. Purchasing activity in the construction sector has dropped every month for the past 26 months. Even though there is a sharp drop off in demand for materials, respondents said delivery times are taking longer, pointing to lower levels of stock inventories.

Irish firms did however, expect overseas business to increase.