Construction activity declines at fastest pace since 2013

Activity in the construction sector fell at the sharpest rate since June 2013, according to the latest Ulster Bank Purchasing Managers Index.

Activity in the construction sector fell at the sharpest rate since June 2013, according to the latest Ulster Bank Purchasing Managers Index.

The index, which tracks changes in total construction activity, fell to 46.2 in October from 48.3 in September. A figure under 50 signals contraction in the sector. 

Ulster Bank said that for the second month in a row, housing was the only monitored category to record an increase in activity during October. 

The rate of reduction of commercial activity quickened from September and was the fastest since June 2013. 

Meanwhile, civil engineering activity declined for the fourteenth consecutive month and at a sharper pace than in September, Ulster Bank noted. 

The index shows that new business among construction firms decreased in October for the first time since June 2013 with companies saying that Brexit uncertainty had contributed to this reduction.

Despite the decreases in activity and new orders, construction firms added to their headcounts in October. 

But Ulster Bank noted that the rate of job creation was marginal and matched the almost six-year low recorded in September. 

Simon Barry, chief economist at Ulster Bank, said today’s survey showed a further loss of momentum in construction activity in October with the index falling for the second month in a row.

He said the detail behind the headline reading also painted a disappointing picture, with weaker activity patterns reported across all three main sub-sectors. 

“Commercial activity decreased for a second month running in October and, similarly to the headline index, the pace of contraction quickened to its fastest since June 2013,” the economist said. 

“More encouragingly, housing activity continues to grow, with its PMI reading of 51.3 still above the expansion threshold of 50. Housing remained the strongest sub-sector for a 10th month in a row, though the pace of residential activity growth has also softened materially in recent months and currently stands at a four and a half year low,” he added. 

Simon Barry said the survey highlights the concerns about Brexit as its continues to weigh on activity and sentiment regarding the sector’s prospects for the coming year.  

“In this context, the recent easing of concerns regarding Brexit crashout risk may offer some support for construction confidence and activity in the months ahead,” he stated.

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