The latest Ulster Bank purchasing managers' index on the construction sector finds that the rate of decline in activity slowed for a second consecutive month in February. The pace of contraction was the slowest in 27 months. The index rose to 40.4 in February from 36.1 in the previous month. Lower new business was the main factor driving the reduction in activity. The fastest decline of the three monitored sectors in February was recorded in the civil engineering category, where activity has decreased every month since December 2007. Housing activity fell at the weakest pace in nearly three years, while the slowest contraction of the three sectors was posted in the commercial category. Commenting on the survey, Lynsey Clemenger, Economist at Ulster Bank, noted: “The latest reading of the Ulster Bank Construction PMI shows that a lack of new business is continuing to weigh on the domestically-focused construction sector. "Activity remained well into contractionary territory in February, albeit that the pace of decline was the slowest since November 2007," she said. "This stands in contrast to the signs from the corresponding manufacturing and services sector surveys which have been more encouraging lately, with improved global conditions and an associated rise in export orders bringing these two sectors close to expansion. "While new orders in construction firms continued to decline in February, the rate of contraction does look to be moderating. Nevertheless, with new business still falling, employment in construction firms continued to be scaled back, albeit at a slightly slower pace than in January." Ms Clemenger said developments across each of the housing, commercial and civil engineering sectors mirrored the change in the headline construction PMI index, with all three sectors showing a tendency to contract at a less severe pace for the second month running in February. "Looking ahead, firms continue to think that activity will improve in a year’s time, even though optimism levels did slip back a little following the surge in confidence in January,” she added. In February, there was a further steep reduction in new business due to a combination of uncertainty among clients and intense competition. The fall was broadly similar in strength to that seen in January. As a result, Irish constructors cut jobs again in February, extending the current sequence of decreasing staffing levels to 34 months. The pace of reduction remained considerable, despite slowing to the weakest since last June. With new business falling again in February, Irish constructors continued to be cautious when making purchasing decisions. Consequently, purchasing activity decreased for the 34th month running, and at a substantial pace. As demand for inputs decreased further in February, suppliers competed for new business by reducing their charges. Input costs at Irish constructors fell at the sharpest pace since last September. Falling workloads at suppliers were largely responsible for another shortening of lead times. Although the rate of improvement eased for the sixth successive month, it remained marked overall. Optimism regarding future activity levels was recorded for the second consecutive month in February. However, the level of sentiment was slightly weaker than the long-run series average as panellists forecast that new business would remain difficult to secure. |
