Signs of construction ‘stabilising’

Housebuilding activity increased for the first time in 19 months showing that there are some tentative signs of stabilisation in the construction sector, though at very low levels, according to the Ulster Bank Construction purchasing managers’ index.

The index was 47.5 at the end of July, which was up from 43.4 the previous month. However, any reading below 50 shows that overall, the sector is still contracting.

“There were signs of emerging stabilisation in the Irish construction sector in July according to the latest reading of the Ulster Bank Construction PMI,” said Ulster Bank chief economist Simon Barry.

“Notably, the survey picked up an increase in new orders last month — the first such increase since late 2011. Last month we noted the less negative trends in new business in June.

“But this has given way to an outright increase in order levels in July as the index broke through the key 50 level — indicating expansion — as 35% of firms reported higher orders levels compared with 24% reporting declines.”

During the boom years, the construction sector accounted for nearly one-quarter of all economic activity.

However, since the economic collapse, the property sector has been in freefall. The latest survey shows that even though employment levels continue to fall, the pace of decline has eased to its weakest level since February.

Moreover, cost inflation has reduced for the fifth month in a row. Furthermore, 43% of all respondents to the survey claimed that they were optimistic that activity would pick up in the coming year.

“Some caution is still warranted on the sector’s performance, however,” said Mr Barry. “The overall Construction PMI continues to signal ongoing declines in activity, with the PMI remaining sub 50, at 47.5 last month.

“However, this was the highest reading since Dec 2011 consistent with an easing in the pace of decline,” he said.

“The return to expansion in new orders, if sustained, should promote greater stability in overall activity trends in the period ahead. The housing sector was the best performing of the main sub-sectors last month, with a PMI reading of over 50 pointing to an increase in activity levels for the first time since late 2011.

“Commercial and civil engineering recorded further falls, albeit at a slower pace compared with recent quarters.”