Business And Leadership, Ireland's Business News Service

The Ulster Bank Construction Purchasing Managers’ Index (PMI) showed an improvement last month, rising to 36.1 in January, from 33.1 in December.

While the rise marks the PMI’s highest level since last August, it still leaves it well below the 50 mark that separates growth from contraction in the sector, as business conditions continued to deteriorate.

Activity in the sector has now decreased in each month since June 2007.

Sectoral decline
The civil engineering sector led the decline in January, the PMI showed, where activity decreased for the 26^th successive month.

The commercial sector registered the weakest decline in January, although the contraction was still substantial.

Meanwhile, activity on residential projects has fallen in each month since November 2006.

Overall in the sector, the rate of contraction in new business at Irish constructors eased markedly in January to its weakest since October 2007.

However, the decline in new orders – the 34^th in successive months – was still substantial as panellists reported a lack of available tenders.

Employment
Employers in the sector continued to cut jobs during the month, but the latest cuts were the steepest since May 2009.

However, optimism regarding future activity levels rose to its strongest in 31 months, and was higher than the long-run series average. Positive sentiment reflected an expectation that wider economic conditions will improve over the coming year.

“The January survey of the Ulster Bank Construction PMI indicates that there was some slight easing in the rate of contraction in activity last month. At 36.1, the headline PMI continues to point to pronounced weakness in activity levels but it did rise to its highest level since last August. There was no indication of any improvement in employment dynamics; the jobs index of the survey fell marginally and is still very much consistent with a sector that is shedding labour,” said Simon Barry, Chief Economist Republic of Ireland at Ulster Bank.

Boost in optimism
“However, some of the forward-looking elements of the survey showed a bit more promise. The new orders index jumped by over 8 points to its highest level in over two years; orders are still declining but some sense here that the pace of deterioration is easing.

“More encouraging was a 10-point surge in the Future Expectations index which rose to a 31-month high. The January survey picked up a clear improvement in optimism as respondents expressed an expectation that the wider economy will improve over the coming year. There were also indications that Irish construction firms are seeking growth opportunities in markets abroad, with a number of respondents looking to the UK in this regard,” Barry added.