Survey shows uplift in building sector

There are signs that the construction sector is beginning to stabilise albeit at very low levels, according to the latest Ulster Bank Construction Index.

The August reading was 49.7 compared with 47.5 the previous month. Anything below 50 shows that the sector is still contracting.

At the height of the property bubble the construction sector accounted for 23% of GDP. Minister for Finance Michael Noonan has said it was important for the economy to have a construction sector averaging 8%-9% of GDP. The sector now makes up less than 5% of GDP.

The survey found there was a rise in new business last month at the fastest pace since Mar 2007, but construction firms continue to shed jobs.

Ulster Bank senior economist, Simon Barry, said, “The August results of the Ulster Bank Construction PMI survey offered further encouragement on trends in the Irish construction sector, which continues to show signs of stabilising.

Most notably, the New Orders index posted another above-50 reading last month, thus pointing to a second consecutive monthly rise in new business levels. And the improvements in orders have now begun to foster increases in activity levels in both the housing and commercial sub-sectors — the first time in almost six years that two areas of the construction sector have experienced rising activity in the same month.

Input costs fell for the first time in 13 months. And in an encouraging sign for the sector, sentiment among construction firms for the next 12 months was at its highest level since Jan 2007.

The overall PMI index also increased last month, though remained just slightly below 50.

But at 49.7, the index is within touching distance of the stabilisation point of 50 — a milestone which looks set to be reached in the coming months.