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| Source: NTC Economics |
Construction activity fell at a substantial rate in Ireland in January. The Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to measure the overall performance of the construction economy – posted 35.3, its lowest reading in the survey history after easing for the third month in a row. The Index has now signalled falling construction activity in each month since June 2007.
Commenting on the survey, Pat McArdle, Chief Economist at Ulster Bank, noted that:
“It is now clear that the decline in construction activity accelerated in recent months and the January number is a low for the series which began in June 2000. A small bounce in new orders is unlikely to be sufficient to prevent further falls in activity. Employment falls were a survey record for the second consecutive month in January.
“Housing has registered sharp output declines since late 2006 - this strategy has been reasonably successful as price falls to date have been limited, albeit that there were a few significant price-cut announcements in January. While housing output continued to contract, the rate of decline did show some tentative signs of levelling off in January.
“Commercial activity has turned negative in the past three months, surprising given the general belief that this sector is increasing output with a number of high profile developments under construction. Civil posted another weak number.”
Declines in activity recorded in all three construction areas
For the second month in a row, activity declined in all three construction areas monitored by the survey.
Housing remained the worst performing, as the rate of contraction of activity was again a survey record. Data signalled the sharpest fall in commercial activity since July 2003. Civil engineering activity declined at a moderate rate that was weaker than in December.
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| Source: NTC Economics |
Constructors recorded further sharp fall in new work
In January, Irish construction firms recorded a further substantial fall in new orders, which was attributed to a general deterioration in demand and greater competition for contracts out to tender. The rate of contraction of new orders was the second-sharpest in the survey history, after easing only slightly from December’s record.
Employment declined at survey record pace
The latest figures pointed to a further survey record rate of decline in employee numbers in the construction sector. In January, employment fell sharply as firms adjusted to lower activity requirements and reduced new order volumes.
Costs increased solidly in January, purchasing fell at record rate
Prices paid for inputs continued to increase, reflecting reports of higher fuel and transport costs. The rate of cost inflation rose from December’s forty-nine month low, but was well below the average for the past year.
Input buying at Irish construction firms fell at the sharpest pace in the survey history in January. The decline was attributed by panellists to reduced site requirements and lower new order volumes. The decline in purchasing led to a quieter month for suppliers, and a sharp improvement in delivery times.
Future confidence sinks to four-and-a-half year low
Irish constructors remained pessimistic in January regarding the outlook for activity in a year’s time, with around 36% expecting a decline. Negative sentiment was the strongest since July 2003, as many firms anticipated that conditions in the construction sector would deteriorate further in 2008.
