Commercial construction on up

Construction activity grew strongly in February even though house building declined for the fourth month in a row, according to the Ulster Bank Construction Purchasing Managers' Index.

The index showed that the pace of construction activity in February was the strongest in eight months, registering at 57.9. This was the 42nd consecutive month of increased activity in commercial construction.

Activity on government-funded infrastructure projects also rose during the month.

Overall, growth in construction has occurred in each month since September 2003.

Total construction activity in February rose from 54.8 to 57.9 on the index. Any increase above 50 signifies an increase on the previous month while a reading below 50 indicates a decline.

Housing activity was measured at 47.9, compared with 47.7 in January. Commercial grew from 58.8 to 64.8 while civil engineering activity was up from 53.2 in January to 55.4 last month.

Pat McArdle, chief economist of Ulster Bank, said it was too early to conclude if rising interest rates were impacting on housing activity, which he said had declined "modestly" since November.

"It could be bad weather during the winter months that has affected output and production," he said. "We will have to wait until March figures are available before we know the impact of the recent budget measure on mortgage relief and the [European Central Bank] interest rate rises."

Mr McArdle said that 2007 would probably be the first time in many years when the level of house building would be below that of the previous year. He said 80,000-85,000 units are likely to be built this year, compared with 88,000 in 2006.

"That's still a lot of homes and a lot of jobs involved in building them," he said.

The increase in commercial building activity is taking place against a backdrop of recent significant job losses. About 2,000 jobs were lost in the first two months of 2007.

In spite of this, Mr McArdle remains positive about the employment outlook.

"The reality is that a net 85,000 jobs were created here last year," he said. "While it's unpleasant that people should lose their employment, if they reskill they should get another job."

He said that while jobs were being lost in the manufacturing sector, employment has remained strong in the services and construction industries.

The survey also found that new order volumes rose in February as marketing campaigns and an improvement in demand contributed to growth.

The rate of growth in employment also improved last month, with respondents suggesting that staff were hired as a result of an increase in new orders.

"There is no sign that job shedding in the construction sector is imminent," Mr McArdle said.

The survey found that of the 37 per cent of firms that anticipated activity growth, most mentioned planned marketing activities and higher new order levels.

Prices of a wide range of materials also rose sharply during February.