Hope springs...

Irish construction plummets

Published:  15 June, 2010

DUBLIN: Construction activity continued to decrease last month and at a faster pace, according to the latest Ulster Bank Construction PMI.

Activity on residential and public sector projects contracted at sharper rates than in April. However, commercial activity fell at a slightly weaker pace.

The index, which tracks changes in total construction activity, declined to 40 in May from 42.5 in April. A reading below 50 indicates contraction.

The data shows that input costs in the sector increased for the first time in 21 months. The rise reflected higher raw material costs, as well as the relative weakness of the euro against the dollar that resulted in higher import prices.

New business decreased again in May, extending the current sequence of reduction to more than three years. However, the rate of contraction was only modest, having eased to the weakest since August 2007.

Simon Barry, chief economist at Ulster Bank Ireland said that the latest PMI reading confirms that the recession in the construction sector has now lasted for three full years as the index level of 40 was the 36th consecutive reading below the 50 break-even level.

"A fresh, additional challenge facing the sector picked up by last month's survey was the first rise in input costs since August 2008, a development that partly reflects the euro's fall on the currency markets in recent months which looks to be exerting upward pressure on import prices."

"While indicators of current activity in the sector continue to paint a picture of weakness, the more forward-looking elements of the survey continue to offer some encouragement about future prospects. Notably, the expectations index recorded another increase in May to show confidence at its highest level since March 2007, as firms expressed more hope that wider economic conditions will strengthen in the coming year."

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