Construction slumps to new low

THE construction sector suffered yet another blow last month — as a measure of its performance fell to a record low.

The latest Ulster Bank construction purchasing managers index (PMI) fell to 33.9 in May — its lowest ever reading.

The figure is down significantly from the 50.7 reading a year earlier. Housing was the worst performing sector, with work on residential projects falling rapidly and at a sharper pace than in April.

Commercial activity fell at the sharpest pace in six years, with civil engineering also declining substantially.

The PMI has now signalled contraction in each month of the past year.

Chief economist with Ulster Bank, Pat McArdle, said while the decline in housing has levelled off in recent months, other construction continues to weaken, dragging down the overall index.

“We maintain the view that while housing will remain in contraction for some time, any significant worsening is unlikely,” he said.

Employment in the construction sector declined at a substantial pace in May, with evidence suggesting that the record fall in staffing levels reflected declining new order volumes.

Employee numbers have now fallen in each month since May last year.

Mr McArdle said: “The record low in employment mirrors weak new orders, indicating a poor outlook for construction activity in coming months.

“This is reflected in the sentiment of constructors, with almost a third of those surveyed of the view that activity over the next year will be even weaker.”

Figures released last week by the CSO for the first quarter of 2008 also confirmed the fall-off in construction employment.

Lower activity was attributed by constructors largely to reduced new order volumes in May, which were in turn linked to deteriorating domestic demand conditions.

Data pointed to a 14th successive monthly fall in new orders, while the rate of decline accelerated for the third month in a row and was a survey record.

Also prices paid for inputs rose last month, but at only a slight pace.

The index noted that higher fuel prices led to increased costs at some firms, but competition amongst suppliers led a number of constructors to record a reduction in input prices.

Input buying at constructors declined rapidly as firms adjusted to reduced workloads, the survey said.

Purchasing fell for the 13th month in a row and at the sharpest pace in the survey history.

Constructors were negative overall for the fourth time in the past six months.

Shortages of new work for tender contributed to pessimism amongst constructors regarding future activity growth.


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