Construction firms report first rise for new business in over three years

THE BELEAGUERED construction sector moved closer to levelling off in July, as firms reported the first rise in new business in more than three years.

The rise in new orders encouraged construction companies to be optimistic about the future prospects for activity, according to the latest Ulster Bank survey of the sector. Despite the slight increase in new business, overall activity continued to decline, albeit at a slower pace than in previous months, the purchasing managers’ index (PMI) showed.

The PMI gave a reading of 45.0 in July, up marginally from 44.9 in June, but still below the 50 mark that separates growth from contraction. This was the slowest rate of contraction in three years.

Ulster Bank chief economist Simon Barry said the index showed that conditions in the Irish construction sector remained “very tough”, with firms continuing to cut back sharply on their employment levels.

Activity in all three strands of the construction sector – housing, commercial and civil engineering – continued to slide in July. The steepest decline occurred in the residential category, where the rate of contraction actually accelerated during the month.

“Looking forward, the July survey picked up a further improvement in confidence among Irish construction firms,” Mr Barry said.

The rise in new business would provide “added encouragement”, he noted. Overall, Ulster Bank struck a cautious note on its outlook for the sector, however.

“As heartening as this development is, the increase is very modest indeed and it is probably more an indication of possible stabilisation in the sector at very weak levels rather than a strong recovery anytime soon.”

Input costs at Irish construction firms rose during the month due to higher raw material prices.

Meanwhile, the Ulster Bank PMI for Northern Ireland’s private sector in July showed the strongest fall in new business and employment since April 2009.

The level of new business taken by private sector companies in the region fell for the 32nd month running in July. The rate of decline accelerated for the fourth-consecutive month, and was the fastest for more than a year. New export business posted a slightly steeper rate of decline than total new orders during the latest period.

Private sector jobs fell for the 29th month, with all sectors covered by the survey registered shrinking workforces. The most substantial job shedding was seen in construction and services.