Tuesday 20 March 2018

Building activity decline shows signs of easing

Maeve Dineen

BUSINESS conditions at Irish construction firms worsened again in February, although there were some signs the rate of deterioration was easing.

While construction activity declined sharply, the pace of contraction was the slowest in 27 months.

The Ulster Bank Construction Purchasing Managers' Index (PMI) surveys purchasing managers in the construction industry and uses a score above 50 to denote growth and a score below 50 to denote contraction.

The latest survey showed an increase to 40.4 in February, up from 36.1 the previous month. Less new business was the main factor driving the reduction in activity.

Commenting on the survey, Ulster Bank economist Lynsey Clemenger said the reading showed a lack of new business was continuing to weigh on the domestically focused construction sector.

“The survey is in sharp contrast to surveys from the manufacturing and services sectors which have been more encouraging lately,” she said. Uncertainty among clients, combined with intense competition, led to the steep reduction in new business in February.

Consequently, construction jobs were cut again in February, extending the current sequence of decreasing staffing levels to 34 months. “Developments across each of the housing, commercial and civil engineering sectors mirrored the change in the headline construction PMI index, with all three sectors contracting albeit at a less severe pace,” Ms Clemenger added.

With new business falling, Irish constructors were cautious when making purchasing decisions. Consequently, purchasing activity decreased for the 34th month running, and at a substantial pace.

Demand for inputs also decreased further in February and suppliers competed for new business by reducing their charges. Input costs fell at the sharpest pace since last September.

On a rare positive note, optimism regarding future activity levels was recorded for the second consecutive month in February.

However, the level of sentiment was slightly weaker as those surveyed forecast that new business would remain difficult to secure.

“Looking ahead, firms continue to think that activity will improve in a year’s time, but that optimism levels did slip back a little following the surge in confidence in January,” Ms Clemenger said.

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