December data from the Ulster Bank Construction Purchasing Managers’ Index (PMI) for the Republic of Ireland indicates that freezing weather conditions exacerbated already weak client confidence and contributed to a further reduction in construction activity.
Falling workload was a key factor behind another substantial decrease in employment in December.
The rate of job shedding was the fastest since May, as around five times as many companies cut staffing levels as increased them.
Severe weather delayed deliveries and so lead times lengthened for the first time in more than three-and-a-half years. The combination of falling new orders and freezing weather was the main reason for a steep drop in purchasing activity. The substantial reduction was in marked contrast to a slight rise in input buying in August.
Input cost inflation accelerated in December, with the latest increase in input prices the fastest in 28 months. A range of raw materials including insulation, plastics and steel were mentioned by panellists as having gone up in price since November.
Commenting on the survey, Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, said that: “The final reading for 2010 of the Ulster Bank Construction PMI indicates that it was a weak end to another extremely tough year for the Irish construction sector. The overall activity index recorded its fourth consecutive monthly decline, as the rate of contraction accelerated to its fastest pace since last May. The recent cold snap undoubtedly added to the sector’s difficulties in December and so the survey results may somewhat exaggerate the degree of weakness last month. However, aside from weather effects, it is clear that the sector continues to face ongoing declines across the three main subsectors.
Civil engineering was again a particular weak spot as the rate of decline here quickened for the fourth month in a row, leaving it as the under-performer across the sector as a whole. Commercial activity also declined at a more rapid pace last month, and although the pace of decline in Housing eased a touch, homebuilding too is still in contraction territory.
“New orders also fell again in December, as they have done since the late summer, as the disruption caused by the adverse weather added to the downward pressure on new business flows. The ongoing declines in both activity and order books resulted in a further decline in employment which posted its forty-fourth consecutive drop in December. Looking to the year ahead, survey panellists have concerns about the implications of government budgetary spending cuts. However, an expectation that the economy will stabilise in the coming year resulted in a slight improvement in overall confidence about future business activity.”
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Index readings above 50 signal an increase in activity on the previous month and reading below 50 signal a decrease. All indexes given above and displayed in the charts are seasonally adjusted.
Source: Markit
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