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Construction activity continues to fall

Monday, March 11 10:29:44

Irish construction firms continued to record falling business activity in February, with the rate of decline little-changed from that seen in January.

New orders and employment each fell at slower rates, however, and business sentiment improved.

Meanwhile, a slight acceleration of input cost inflation was recorded. The Ulster Bank Construction Purchasing Managers' Index (PMI) - a seasonally adjusted index designed to track changes in total construction activity - posted 45.3 in February, slightly lower than the reading of 45.8 posted in January.

This signalled a marked, and slightly quicker reduction in construction activity during the month. According to respondents, lower new work was a key factor behind the decline as inflows failed to compensate for the completion of projects.

"The February reading of the Ulster Bank Construction PMI indicates that the business environment remains challenging for Irish construction firms," said John Fahey, Economist Republic of Ireland at Ulster Bank.

"The latest survey result indicates that the pace of contraction was slightly stronger last month, registering 45.3 in February, versus a reading of 45.8 in January. From a sectoral perspective, all three principal sub sectors (i.e. housing, commercial activity, civil engineering) continued to experience contraction in activity levels. It is not surprising then that survey respondents remain in job shedding mode, although the pace of contraction in employment levels did ease for the third consecutive month, and the reading of 48.3 is moving nearer the breakeven level of 50."

"The construction sector has been severely hampered by the lack of new business opportunities. The new orders index, which is a key lead indicator, continued to contract in February. However, the rate of contraction in new orders slowed for the third month running and is now at its best level since March 2012, offering some slight encouragement that the dampening impact from the lack of new business is easing."

The weakest fall in activity was seen on housing projects, with the sector also the only one monitored to post a slower decline than at the start of the year. Commercial and civil engineering each saw a slightly quicker reduction in activity, with the sharper overall fall for work on civil engineering projects.