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Pace of building slump eases in January

Monday, February 11 10:19:31

The battered Irish construction sector continued to shrink last month, although rates of decline in activity, new orders and employment all eased during the month to its slowest pace since May of last year.

New orders and employment all eased during the month and business sentiment improved while the rate of input cost inflation slowed.

The Ulster Bank Construction Purchasing Managers' Index (PMI) - a seasonally adjusted index designed to track changes in total construction activity - posted 45.8 in January, signalling a further marked reduction in construction activity. However, the reading was higher than the 43.0 seen in December, and pointed to the weakest decline in activity since May 2012.

Commenting on the survey, Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, noted that the first reading of 2013 of the Ulster Bank Construction PMI indicates that the rate of deterioration in business conditions in the sector has eased slightly so far this year.

"While it remains the case that activity levels continue to decline, the pace of decline eased to its slowest since May 2012. Less-negative trends were evident in the housing sector - where the PMI rose to its highest level in a year - and in commercial construction. However, civil engineering remains the weakest sub-sector, with the January survey picking up an acceleration in the rate of contraction in activity. A weak start to the year for Exchequer capital spending is probably a contributory factor here," he said.

"Similar to the trends in the overall PMI, the new orders index has crept up to levels last seen in the second quarter of last year. However, the index of new business flows remains below the key breakeven level of 50 so the less-negative trends here are not yet consistent with any near-term stabilisation for the sector. And it is the dearth of new work which remains a key obstacle to any improvement in employment, though the pace of decline in staffing levels did ease to its slowest pace since last February."

Slower reductions in activity were seen on both residential and commercial projects during January. The weakest fall was in housing activity, which decreased at the slowest pace in a year. In contrast, the rate of contraction in civil engineering activity accelerated, and was much faster than that seen for overall construction activity.