Business Irish

Thursday 24 May 2018

Building slides again but outlook is positive

Pat Boyle

THE latest construction industry survey from Ulster Bank points to a possible recovery in about a year, the first time the survey has resulted in a positive outlook in 16 months.

While the Ulster Bank construction activity index for June held no surprises, with another steep slide in activity levels, the forward-looking component turned positive for the first time since March 2008.

The Ulster Bank Construction Purchasing Managers' Index (PMI), a seasonally adjusted index designed to measure the overall performance of the construction economy, rose to 36.3 in June, from 31.1 in May.

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

Although the pace of reduction eased to its slowest since March 2008, it remained considerable, Ulster Bank said. This was largely attributed to the continuing recession here.

But it is the forward-looking component of the survey which holds out most hope.

"One interesting point from the June survey is that the index of expected future activity exceeded the key 50 no-change level for the first time since March 2008.

"This is an early sign of fading pessimism within the industry and activity could begin to pick up on a 12-month time horizon, albeit from extremely low levels," Ulster Bank economist Simon Barry said.

He also noted a 12-point increase in the employment index of the survey this month.

"Again, this index is at low levels and is still pointing to falls in construction employment. But the fact that this component is retreating from its record low suggests that the pace of job-shedding in the sector may be easing somewhat," he said.

But the immediate outlook for the industry is glum, with June data signalling that operating conditions in the sector continued to deteriorate. Activity fell substantially, as did new business.



Job cuts

Further job cuts were also indicated, although the rate of job-shedding eased markedly.

Each sub-index of the PMI -- housing, civil engineering and commercial developments -- continues to point to low, and still falling, levels of construction activity.

However, while civil is a relative weak spot, all three sub-indexes increased in June and have moved further from their lows of earlier in the year.

"This adds to our sense that the most severe point of the construction contraction may be over," Mr Barry said.

Housing activity fell for the 32nd month. The latest decrease was still considerable, despite registering the weakest decline since July 2007.

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