Construction activity declines but firms remain optimistic

Construction activity ground to a halt in January due to the Covid lockdown, ending a two-month sequence of growth.

The Ulster Bank construction purchasing managers' index (PMI) shows while the pace of contraction was not as severe as in April and May of last year during the first lockdown, activity fell to 21.1 from 52.3 in December. A reading below 50 indicates that activity is contracting.

Substantial reductions in activity were seen across each of the three monitored categories with the steepest decline in housing, after a marked expansion had been recorded in December. The falls in commercial and civil engineering activity were the strongest since April and May last year respectively.

New orders

A severe drop in new orders was recorded with around 60 per cent of respondents seeing a reduction in work during January. The fall ended a three-month sequence of expansion and was the sharpest in eight months. Staffing levels and purchasing activity also fell sharply during the month.

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"The sector is likely to remain under significant pressure in the near-term. But more encouragingly, the January results also showed that Irish construction firms continue to express optimism in the year-ahead outlook reflecting expectations that workloads will improve again once the health picture improves and restrictions are eased," said Simon Barry, chief economist with Ulster Bank.