Business Irish

Saturday 18 November 2017

PMI fall reveals construction sector slump for fifth year in row

Peter Flanagan

Peter Flanagan

THE construction sector has now shrunk for five years in a row, and there is little hope for a turnaround.

The latest construction Purchasing Managers Index (PMI) from Ulster Bank showed activity fell again during May -- the 60th consecutive month activity has decreased.

The construction PMI measures activity in the sector by collating a number of factors into a single index.

A figure over 50 shows growth; under 50 shows contraction.

In May, the index stood at 46.3. That was slightly better than April's 45.4, but still well below a return to expansion.

Ulster Bank's chief economist for the Republic, Simon Barry, said the survey showed continued declines across all the main construction sectors.

"Housing activity recorded the sharpest pace of retrenchment for the second consecutive month," Mr Barry noted.

"There was some easing in the rate of decline in civil engineering, where activity fell at its slowest pace in over four years. However, this sub-sector remains very much in contraction mode -- as does commercial activity, where the pace of contraction accelerated to its fastest pace since last October," he said.

Indices

The main PMI draws from three indices, tracking housing, commercial activity and civil engineering. In May they stood at 41.8, 46.8 and 46 respectively.

New orders fell for the fifth successive month, and what new business that was secured only came when firms lowered their prices.

"The construction sector remains bedevilled by a scarcity of new business and this was again a feature last month, with signs of stabilisation around the turn of the year giving way to renewed weakness in recent months," said Mr Barry.

"Order levels for new work fell for the fifth consecutive month, and the rate of decline picked up to its fastest pace in three months. In turn, the shortage of new business remains a negative influence on employment trends in the sector.

"Last week's Quarterly National Household Survey showed a 3,700 quarterly fall in construction employment in the first quarter: the more timely results from the April and May PMI surveys point to further job losses in the second quarter," he added.

Staffing levels decreased for the 61st straight month, with the rate of job cuts unchanged from that registered in April. Purchasing activity fell at the fastest rate since September.

Despite the poor survey results, construction firms say they are still optimistic that business will improve over the next year, with sentiment improving from that registered in April.

Having said that, though, Ulster Bank said the improving sentiment was based more on the hope that business has to improve, given the historically low levels currently being recorded.

Irish Independent

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