The rate of contraction in Irish
construction activity continued to ease from the sharp falls seen at the end of
2010, but output still decreased during February.
New business and employment both
declined at sharper rates, as demand in the sector remained subdued. The Ulster
Bank Construction Purchasing Managers’ Index (PMI) - - a seasonally adjusted
index designed to track changes in total construction activity - - rose to 47.8
in February, from 45.3 in January, signalling a modest decline in construction
activity in Ireland. Although the latest reduction was the weakest in six
months, it still represented the forty-fifth consecutive monthly fall in
Commenting on the survey, Lynsey Clemenger, Economist at Ulster
Bank, noted that: "Activity in the
Irish construction sector continued to fall in February, according to the latest
reading of the Ulster Bank Construction PMI. However, the rate of decline was
the slowest since August of last year, driven by less steep decreases in
activity in each of the three sub-components housing, commercial and civil
engineering. While the housing index is edging closer to the 50 mark that
separates contraction from expansion, civil engineering remains a particular
weak spot. Indeed, the latter is likely to continue to underperform given the
ongoing retrenchment in government capital spending.
"Respondents to the survey noted continued declines in new work
as a major factor in explaining the forty-fifth consecutive monthly decline in
construction sector activity last month. Scarce new business has meant that
employment in the sector fell at a faster pace in February and even modest job
gains continue to look some way off. An additional negative in recent months has
been the rising input prices, which are now increasing at the fastest rate since
July 2008. The construction firms surveyed noted higher prices for copper, fuel
and steel in particular, a clear sign that the recent increases in global
commodity prices are impacting on the cost base for domestic firms. Despite the
lack of new business and the notable rise in input costs, looking a year ahead
constructors continue to expect that activity will be slightly higher than the
depressed levels prevailing at present."
The number of firms polled was not supplied.
Steep contraction in civil
Activity decreased across each of the broad sectors monitored,
but rates of decline varied. Civil engineering again posted the steepest
reduction in activity, while the residential sector posted a marginal
contraction that was the weakest in the current sequence (which started in
New business fell at sharper pace
Where respondents noted a drop in activity, falling new business
was often cited. New orders fell at a solid pace in February and, in contrast to
the trend for activity, the rate of decline accelerated since January.
Panellists reported strong competition for scarce new business.
Job shedding intensified
Employment also fell at a faster pace during February. The rate
of job shedding remained substantial as companies reduced staffing levels in
line with falling workloads.
Steep input cost inflation recorded
Input prices rose substantially in February, and at the steepest
rate in the current ten-month sequence of inflation. According to respondents,
higher commodity prices was the main factor behind inflation, with copper, fuel
and steel most widely mentioned as costing more over the month.
The rate of decline in purchasing activity accelerated in
February, reversing the marked slowdown seen in January. Input buying has risen
in just one month since May 2007. Suppliers’ delivery times lengthened for the
second time in the past three months, albeit only slightly. Although some
respondents reported improved vendor performance as demand for inputs decreased,
this was more than offset by stock shortages at suppliers resulting in delivery
Sentiment remained positive
Constructors expect activity to be higher in twelve months’ time
than the current low levels. Optimism largely reflected predictions of increased
new work, particularly in the second half of 2011.