Building sector growth slows

Construction sector growth slowed sharply in the first month of the year but failed to dent firms’ appetite for new workers which remained strong, the latest Ulster Bank Construction PMI shows.

The Purchasing Managers’ Index — which dropped to 57.1 in January from 63.1 the previous month — shows rates of expansion in activity and new orders slowing significantly from the end of 2014.

While still expanding, the drop resulted in the weakest level of growth for almost a year with a marked slowdown in the rate of housing activity recorded.

Fears about the number of new homes required to alleviate shortages in Dublin, in particular, are likely to grow in light of the survey’s findings.

A study by the Society of Chartered Surveyors Ireland late last year estimated that 35,000 new homes will be required by 2018 but added that a shortfall of planning approvals existed.

Commenting on the results of the PMI, Ulster Bank Ireland chief economist, Simon Barry said weaker levels of growth should be viewed in the context of strong levels of activity last year.

“While the loss of momentum in January is striking, the softening needs to be seen in the context of the exceptionally strong growth rates recorded through 2014 from which some pullback was always likely. Indeed, other elements held up well last month,” Mr Barry said.

By far the strongest monthly rise in activity was recorded on commercial projects. The rate of growth in commercial activity remained sharp despite easing for the third month running.

Jobs growth and optimism in the sector remained strong last month with near record levels of positive sentiments expressed.

“Sentiment picked up from December levels and was the second-highest in the series’ history behind the record reached last November, suggesting that firms retain a very positive view of the year ahead outlook despite an apparent easing in the pace of activity in January,” added Mr Barry.

The rate of growth in new orders slipped to the weakest level seen in the sector since August 2013 despite improvements reported in the availability of work.

After years of subdued activity in the construction sector, business has picked up significantly of late with levels having now increased in each of the past 17 months.

Civil engineering rose for the fourth month in a row.