Business Irish

Saturday 23 September 2017

Building woes deepen as more jobs lost due to lack of activity

Maeve Dineen

The latest construction industry survey from Ulster Bank reveals a further deterioration of business conditions for the beleaguered sector.

Construction activity, new business and employment all fell sharply during December.

The Ulster Bank Construction Purchasing Managers' Index (PMI), a seasonally adjusted index designed to measure the overall performance of the construction economy, dropped to 33.1 in December, from 34.2 in November. This represented the 31st consecutive monthly reduction in activity and the steepest decline since May.

A reading below 50 signals a contraction in activity levels, and above 50 an expansion.

For the second consecutive month, firms forecast that activity would be lower in 12 months' time than current levels.

Simon Barry, chief economist for the Republic of Ireland at Ulster Bank, said the December reading revealed a very weak end to what was an exceptionally challenging year for the construction sector.

"The overall activity index fell back to its lowest level since May of last year. At 33.1, the index remains considerably below the no-change benchmark level of 50 and continues to point to a sector that is contracting deeply," he said.

"While a pick-up in international economic conditions is beginning to benefit the Irish manufacturing and service sectors, the same is clearly not true for the domestically focused construction industry."

Weakness

Mr Barry said the survey showed a broad-based weakness across commercial, civil engineering and housing.

Anecdotal evidence suggested new work was insufficient to compensate for the completion of existing projects.

The steepest reduction was in the commercial sector, where the drop in activity was the fastest in seven months. The weakest fall during the month was registered for activity on civil engineering projects, although the decrease in the category was still substantial.

New business also declined in December at the fastest pace since April. Increased competition for new work was behind the reduction, with those surveyed reporting a reluctance among clients to commit to new projects.

A knock-on consequence of this was another sharp fall in employment levels. Job cuts have been recorded in each month since May 2007, with the latest reduction in staffing levels the fastest in seven months.

With activity and new business continuing to fall, construction firms lowered their quantity of purchases substantially in December. Purchasing activity has decreased in each of the past 32 months.

For the second successive month in December, firms reported negative sentiment regarding future activity levels. Construction companies' pessimism largely reflected expectations that new business would remain low this year.

Irish Independent

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