Building industry declines further in July

THE RATE of decline in the Republic’s building industry increased last month, with activity falling and job losses increasing, the latest figures show.

The monthly Construction Purchasing Managers’ Index (PMI) by Ulster Bank, which is published today, shows that overall building activity fell sharply in the Republic in July.

The index takes 50 as its benchmark measurement: any reading below this indicates a fall in activity from month to month, while any reading above this figure signals an increase.

The PMI for July returned a figure of 42.2 for total activity during the month, compared with 42.5 for June. Within that, civil engineering activity – that is big, mainly State-funded projects – took the biggest hit.

That sector returned a figure of 37.1 in July, compared with 42.4 in June, indicating a steepening decline. The rate of contraction in commercial building also increased slightly, coming in at 42.7, down from 42.9.

The figures for house building indicated that the rate of decline slowed in July. It returned a reading of 43.2 for the month, compared with 39.1 in June.

While the reading for housing in July is higher than in June, the fact that it is below 50 still means that there was a decline from month to month. However, it does indicate that the rate of decline slowed.

Simon Barry, Ulster Bank chief economist for the Republic of Ireland, said the figures painted a “downbeat” picture of the industry, and pointed out that the overall reading of 42.2 was some way from the break-even point of 50.

“Near-term prospects for the construction sector do not look encouraging,” he said. “Signs of stabilisation in new orders around the turn of the year have given way to renewed weakness in recent months, in turn dampening hopes for a stabilisation in construction activity levels more broadly.

“With current and prospective workloads continuing to decline, staffing requirements for construction firms continue to shrink, with the rate of job-shedding accelerating in July to its strongest in six months,” he added.

The figures show that employment continued to decline. The July index was 43.3, showing that building businesses continued to cut jobs last month. Every index published since May 2007 has shown a fall in employment.

Figures published by DKM Economic Consultants in April showed that employment in the industry had fallen below 150,000. According to that firm, it was over 380,000 at its peak in early 2007.

Mr Barry pointed out that with few signs of a likely increase in activity over the near term, “companies have little incentive to do anything other than cut their workforces, which they have been doing”.

The Ulster Bank Construction PMI is compiled using data collected from managers in selected companies using a questionnaire dealing with areas that include output, new orders, employment and prices.

The figures are adjusted to take any seasonal variation into account.