Index shows sharp fall in construction activity

There is bad news for the construction sector this morning.

A new report indicates a greater-than-expected fall in building activity around the country.

The latest Ulster Bank Construction Purchasing Managers Index shows the decline in construction was the sharpest in 14 months, it decreased to 40.5 in June, from 41.1 in May.

But Ulster Bank economist Simon Barry has said many construction managers are hopeful that 2012 will bring a recovery.

Mr Barry said: "Over 40% of firms expect activity levels to be higher in twelve months time, albeit that this is down on the 46% of firms which held that view last month."

"There were no signs of any imminent improvement in the Irish construction sector according to the latest reading of the Ulster Bank Construction PMI. In fact, the rate of deterioration in activity accelerated for the fourth month running in June as the PMI fell to its lowest level in over a year.

"Activity levels have now fallen in every month since June of 2007 meaning that the construction slump has now entered its fifth year.

"There was a slight easing in the pace of decline in Housing and Commercial activity last month, but with PMI readings of close to 40 in each case (i.e. well below the expansion threshold of 50) these two sub-sectors remain firmly in contraction mode.

"But, as has been the case for most of the past year, the weakest sub-sector is Civil Engineering which continues to contract at a particularly sharp pace.

"As we look to the second half of the year, near-term prospects for the sector as a whole don’t look bright, as incoming orders for new business in June fell at their fastest pace since late last year. Employment, too, continues to fall away, though the pace of decline in June was the slowest in almost four years."