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| Source: NTC Economics |
Data for September signalled a further fall in Irish construction activity in the economy. Moreover, at 41.6, the Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to measure the overall performance of the construction economy – pointed to the sharpest contraction of activity since July 2003. Anecdotal evidence suggested that reduced new order volumes had caused the marked fall in activity.
Commenting on the survey, Pat McArdle, Chief Economist at Ulster Bank, noted that:
“Housing activity weakened further in September as builders and developers reduced output in response to lower new order volumes. This trend is likely to continue as new orders fell sharply in September. Reduced output helps to maintain prices, and the monthly rate of house price decline has, in fact, decelerated from 0.8% in April/May to 0.3% in August. The September PMI points to another sharp decline in employment – usage of sub-contractors fell for the first time in almost four years. While confidence has taken a hit, it is still positive and builders continue to expect that activity in a year’s time will be higher. This confidence in the future may also be reflected in the recent increase in planning permissions granted.”
Housing activity fell at survey record rate
Activity declined in all three areas of construction monitored by the survey in September. Housing was the worst performing, with activity contracting at the sharpest pace in the survey history. Work on civil engineering projects fell at the most marked rate for four years. Constructors recorded only a marginal fall in commercial activity.
New order volumes fell at sharpest rate for over four years
The volume of orders received at Irish construction firms fell at the sharpest rate for fifty-two months in September. Reports from firms suggested that weakness in the housing market and greater caution from property developers contributed to a sixth successive monthly reduction in new work.
Robust reduction in employment recorded
Reduced new order volumes and activity requirements contributed to a fall in construction sector employment for the fifth month in a row. Moreover, staffing levels declined at the sharpest rate since June 2003, with exactly 27% of firms indicating that employee numbers had fallen.
Input prices increased at solid pace
Firms in the Irish construction industry faced a robust increase in input costs in September. Input prices have now risen in each month since November 2003, though inflation in September was well below the average for the current inflationary period.
Irish constructors’ input buying fell sharply in September, reflecting lower new order levels and the utilisation of existing stocks by firms. Purchasing has now declined in each of the past five months.
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| Source: NTC Economics |
Modest improvement in optimism
Future business confidence recovered further in September from July’s low, with optimism for higher activity in a year’s time linked to increased marketing activities and planned expansions. Underlying confidence nevertheless remained well below levels recorded earlier in the year, with concerns over the outlook for the housing market undermining sentiment.
