Further decline in construction sector

Civil engineering is the worst performing sector in Ireland, but those still involved in the construction industry are optimistic for the next 12 months, even as its year-on-year decline continues.

The National Housing Construction Index — compiled by Link2Plans — shows applications for house construction are down 7% on the previous year, while commencements are down 15%.

The construction sector remained deep in contraction territory during May, with further sharp declines in activity and new orders recorded, according to the Ulster Bank Construction Purchasing Managers’ Index.

“With new business decreasing, constructors lowered their staffing levels again. The rate of job cuts was solid, and quickened over the month to the sharpest in 2013 to date.

“Falling new work also contributed to another reduction in purchasing activity — the 33rd in as many months. The rate of decline remained substantial as 36% of respondents signalled a fall in input buying during the month,” the accompanying commentary said.

The index posted 42.0 in May, broadly in line with the reading of 41.9 in the previous month.

Simon Barry, chief economist at Ulster Bank, said the “construction sector remains very much in contraction mode, according to the latest reading of the Ulster Bank Construction PMI. Standing at 42 in May, the PMI was little changed from April, but remained well below the expansion- contraction threshold of 50, thus pointing to sharp, ongoing declines in activity”.

“Those declines remain broad-based, as each of the major sub-sectors continues to experience contraction. Civil engineering remains the weakest sub-sector, followed by commercial, while the pace of decline is not quite as pronounced in housing.

“Survey respondents continue to cite a lack of demand and strong competition as key headwinds and the result was a 17th consecutive fall in new orders — a trend which continues to exert downward pressure on staffing levels.”

Optimism with regards to the 12-month outlook for activity “was recorded again”, with sentiment more or less in line with the previous two months.