Builders in Ireland face seventh year of recession

Industry contracted sharply in May as new orders fell and confidence slumped


Builders are facing into their seventh year of recession, figures published today show.

According to the Ulster Bank Construction Purchasing Managers’ Index (PMI) – published today – the industry contracted sharply in May as new orders fell and confidence slumped.

The bank notes that May’s result means the sector has shrunk every month for the last six years. As a result, the sector is facing into its seventh year of recession.

Simon Barry, the bank’s chief economist for the Republic, warns that clear evidence the industry has reached the bottom “remains elusive”.

Today’s figures follow publication of the National Housing Construction Index yesterday showing that, between January and April, there were 3,857 planning applications for new homes in the Republic, 7 per cent down on the same period last year.

New homes
That report also showed that building work began on just 1,488 new homes during the period, a fall of 15 per cent on the 1,746 recorded during the same months in 2012.

The Ulster Bank PMI, which tracks building activity across the Republic, returned a reading of 42 for May.

Any figure below the benchmark of 50 indicates a contraction for that month, any number above that threshold indicates an expansion of activity.

While May’s outcome was little changed on April’s return of 41.9, Mr Barry notes it is well below the “expansion-contraction threshold of 50”, and as a result, shows a sharp, ongoing decline in activity.

“Those declines remain broad-based, as each of the major subsectors continues to experience contraction,” he says.

“Civil engineering remains the weakest subsector, followed by commercial, while the pace of decline is not quite as pronounced in housing.”

Mr Barry adds that respondents to the survey on which the index is based cited a lack of demand and strong competition as the main difficulties faced. These continued to depress the new business their companies attracted, which had a knock-on effect on staff numbers.

Civil engineering, which is mainly large, State-funded projects such as roads and other infrastructure, came in at 33.9 for May, compared with 34.1 in April. The reading for commercial construction was 40.3 in May, compared with 39.8 the previous month.

Housing fell to 44.2 compared with 43.8, but the National Housing Construction Index shows that some areas of the Republic are performing better than others under this heading.

While the index yesterday shows planning applications and commencements were down, activity in a number of counties has stepped up.

Planning applications
New planning applications increased in eight counties between January and April, with Dublin, where the number increased to 843 this year from 763, leading the way.

Kildare had the actual highest rate of growth in new planning applications, at 28 per cent, but the numbers were 153 this year compared with 120 in 2012.

The other counties where planning applications rose were Cavan, Kilkenny, Leitrim, Longford, Monaghan and Roscommon.

Commencements were down across the board, but Dublin experienced an increase, to 391 from 320, a 22 per cent rise. The other counties where commencements rose were Louth, Mayo and Roscommon.

Link2plans, a business that offers a portal to all formal planning notices in the Republic, compiles the housing index from applications and notices filed with local authorities.

The Irish Times recently reported the Government is examining whether there is scope for an investment programme targeted at the industry.