Civil engineering public works sector contracting: Ulster Bank

Spending on public capital projects may undershoot targets by a large margin this year, according to a survey by Ulster Bank.

Spending on public capital projects may undershoot targets by a large margin this year, according to a survey by Ulster Bank.

Overall, business conditions in the construction sector showed a further sharp improvement in July.

The headline Ulster Bank Construction Purchasing Managers' Index - a seasonally-adjusted index designed to measure the overall health of the construction economy - remained comfortably above the 50.0 no-change mark at 55.6.

Growth of total activity was, however, slightly less marked than in June (when the headline index stood one point higher).

Chief Economist at Ulster Bank Pat McArdle said: "The construction industry boom extended into July but the components displayed quite divergent trends. Housing output continues to grow strongly, albeit with signs that the pre-summer burst of activity may have run its course as house price inflation continues to edge down and supply and demand come closer to balance.

"Commercial activity is again growing strongly as returns in that sector have improved and this looks set to continue.

"However, it is civil engineering, which is strongly influenced by government, that catches the eye. While this sector did well in 2004, it threaded water in the first half of this year and in recent months is displaying outright contraction.

"It appears that major Public Sector infrastructure projects, recently completed, have not being replaced and the Civil Engineering sector is contracting instead of expanding. If this continues, there is likely to be a major undershoot in Public Capital Programme spending again this year."

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