Index records sharp drop in building activity

THE SHARPEST drop in activity in the construction sector in recent times was recorded for April by a monthly index operated by Ulster Bank.

The purchasing managers' index recorded the sharpest drop in construction activity since the index began in June 2000.

The index has recorded contraction for every month since June of last year.

Also, respondents to the survey felt that construction activity this time next year would be slightly below current levels.

The index recorded a score of 34.3 for April, with any figure below 50 constituting a drop in activity since the previous month.

The score for housing was 28.4, with commercial activity scoring 39.2 and civil engineering 34.4.

The chief economist with Ulster Bank, Pat McArdle, said that similar falls had been recorded in the indices for manufacturing and services, which were issued earlier this month.

In relation to the contraction in housing activity, respondents to the survey cited falling demand, deteriorating economic conditions and greater competition as the key factors. "Though it remains the case that the faster the contraction in output, the sooner the eventual turnaround, respondents were more pessimistic regarding the future, expecting that activity in a year's time will be slightly below current levels.

"This is consistent with our view that new house completions next year will remain low as the overhang of supply is cleared."

Mr McArdle said that against this negative background the employment index had hit a new low, indicating that job losses had continued into the second quarter of this year.

He pointed out that although the rate of contraction in housing business was still substantial, it was the weakest contraction for seven months.

Commercial activity fell at the sharpest pace since May 2003, and the decrease in civil engineering activity was the strongest in more than 4½ years.

While activity was falling and competition was increasing, the index found that prices were rising at a robust pace.

Anecdotal evidence pointed to increases in the price of metals and fuels, Mr McArdle said.