Construction sector decline rate slows

The rate of decline in the construction index has slowed, and the pace of decline is the slowest since May according to the Ulster Bank Construction Purchasing Managers’ Index.

The index found on a seasonally adjusted basis the index posted a 45.8 with anything under 50 indicating the sector was contracting.

The result of the index was a three-point improvement on 43.0 reported in December.

There was a small glimmer of light in the construction industry with an increase in confidence reported. Optimism at Irish construction firms improved at the start of 2013, and was the strongest since last June. Positive sentiment was linked by respondents to predictions of improving economic conditions, the index found.

Chief economist for the Republic of Ireland at Ulster Bank, Simon Barry, said that there has been a slight recovery in housing and commercial sectors, but the large scale civil engineering sector remains very weak.

“The first reading of 2013 of the Ulster Bank Construction PMI indicates that the rate of deterioration in business conditions in the sector has eased slightly so far this year. While it remains the case that activity levels continue to decline, the pace of decline eased to its slowest since May 2012. Less-negative trends were evident in the housing sector — where the PMI rose to its highest level in a year — and in commercial construction. However, civil engineering remains the weakest sub-sector, with the January survey picking up an acceleration in the rate of contraction in activity,” he said.

The lack of large civil engineering projects was blamed for dragging the index into negative territory. There has been slight increase in other sectors but due to the overall scarcity of work the construction industry has still not stabilised.

“Similar to the trends in the overall PMI, the new orders index has crept up to levels last seen in the second quarter of last year. However, the index of new business flows remains below the key breakeven level of 50 so the less-negative trends here are not yet consistent with any near-term stabilisation for the sector. And it is the dearth of new work which remains a key obstacle to any improvement in employment, though the pace of decline in staffing levels did ease to its slowest pace since last February,” said Mr Barry.