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Building industry suffers sharpest fall since October

Housing sector worst hit as new projects stall

IRELAND'S construction sector suffered its sharpest contraction since October last month as bruised economic confidence led to a decrease in project work.

New figures from the Ulster Bank Construction Purchasing Managers' Index released this morning show the gauge fell to 45.4 in April from 46.7 in March. Anything below 50 signifies a contraction in the sector.

The bank said the latest figure represents an acceleration in the rate of contraction in activity and that the fall in total activity for the month was the sharpest since last October.

"Weakness early in the second quarter has been particularly notable in the housing sector, which contracted at its fastest pace since September last year," said Ulster Bank's chief economist for Ireland, Simon Barry.

"While the latest PMI (Purchasing Managers' Indices) for manufacturing and services point to expanding activity levels in those internationally-traded sectors, the domestic-facing construction sector continues to contract," he added.

It's been estimated that just 5,000 homes are now being built in Ireland on an annual basis, compared to the 78,000 homes built in 2007. The houses being built now are virtually all one-off developments rather than properties that are part of bigger developments.

Job cuts

The current pace of housing construction is also acknowledged to be unsustainably low given longer term population growth. "The falls in activity levels across the sector reflect a scarcity of new business, as new orders continue to decline," added Mr Barry.

"While the falls in new business levels have become much less severe in recent months compared to earlier in the downturn, the persistent declines in workloads have resulted in further job cuts, extending the period of falling employment in the sector to five years."

Last week, chief executive of Cavan-based insulation maker Kingspan Gene Murtagh said there had been a noticeable fall in the past two months in construction activity in Ireland.

"We were showing improvement up until not long ago," Mr Murtagh said. "What's holding our business up here very much is refurbishment. New build just doesn't exist. Just when you thought it was at its lowest, it's gone again."

The Ulster Bank survey showed that where construction activity decreased during April, respondents to its survey cited weak economic conditions and a lack of confidence among clients as the key factors for the fall.

Commercial activity decreased for the third month in a row, but at only a marginal pace. Respondents to the Ulster Bank survey are still predicting that activity in their sector will increase in the coming 12 months, but sentiment is at its lowest since last October.

Irish Independent