Construction activity falls sharply in November

Construction activity falls sharply in November

The construction industry continues to struggle according to the latest Ulster Bank Construction PMI

Construction activity fell sharply again in November as new orders declined at an accelerated pace, according to the latest Ulster Bank Construction Purchasing Managers’ Index.

The index reveals that job shedding intensified during the month in line with reduced workloads, and firms lowered their input buying. Meanwhile, the rate of input price inflation quickened again, with the latest rise mainly reflecting higher fuel costs.

The index remained the same at 42.6 in November, signalling a further sharp monthly reduction in activity at Irish construction firms. Respondents attributed the latest fall in activity to lower new orders and weak confidence.

“The November reading of the Ulster Bank Construction PMI indicates that business conditions remain very tough for Irish construction firms,” said John Fahey, economist Republic of Ireland at Ulster Bank.

“The latest survey results show that while the pace of contraction in overall activity was unchanged from October levels, the reading of 42.6 indicates activity continues to fall sharply.

“From a sectoral perspective, the weakness recorded in November was broad-based, with all three of the principal sub sectors experiencing declining activity levels. The sharpest contraction was recorded in civil engineering, which retained its tag as the weakest of the three sectors, although both the housing and commercial activity indices continue to be some way below the expansion threshold of 50. Not surprisingly, given the ongoing contraction in activity, the sector remains in job shedding mode, and in fact the pace of contraction in employment levels was at its sharpest since May 2011.”

In terms of the outlook, Fahey said a key headwind for the construction sector is the lack of new business opportunities. “The new orders index, an important lead indicator, fell at a faster pace compared to a month earlier and in the process registered its eleventh consecutive month of contraction. The provision in Budget 2013 for the establishment of real estate investment trusts (REITs) may provide some support for the property sector over time. Overall though, the near term prospects for the construction industry remain weak and the sector will continue to face a challenging outlook in the coming months.”

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