Things are going to get worse before they get better in the construction industry, a sentiment confirmed by the latest Ulster Bank Purchasing Managers’ Index (PMI).
During December, activity and input prices fell at record rates, the steepest drop off in overall construction activity in the eight and a half year history of the survey.
Over 56 per cent of the survey’s panellists reported lower activity during the month, against less than nine per cent who noted a rise.
“A similar [decline] was evident across Europe and the composite construction index for France, Germany, Ireland, Italy and the UK also reached a record low in December,” said Ulster Bank Chief Economist Pat McArdle.
“We are not unique. The UK housing index is now quite close to the Irish one having begun to fall much later but rapidly catching up while both France and Italy are also below 30. German new house construction is holding up better but is still well below 50, i.e. contracting, as indeed it has been for most of the past decade.”
Added McArdle: “Irish housing and commercial activity reached record lows while civil engineering declined significantly.
“Input prices also fell at a record pace, with only a few items rising in price. Respondents were pessimistic regarding the future, citing falling demand as well as lack of credit. At this stage, it is a moot point as to which is the more important.”
The sharpest fall in activity was, not surprisingly, in the residential sector, with the rate of contraction in housing activity also proving a survey record, with commercial activity also declining at a record rate.
The weakest fall in activity was in the civil engineering sector, though the pace of decline was still the sharpest since August 2003.
The fall in new orders during December was the second worst in the survey’s history, beaten only by the series record posted last July. New business levels have also declined continuously since April 2007.
The fall-off in activity has also accelerated the handing out of P45s. with employment numbers in the sector continuing to fall, but it should be noted that the numbers laid off were the lowest in six months.
Unsurprisingly, Irish constructors remained pessimistic about the future as expectations were at the second-most negative in the history of the Ulster Bank survey.
A lack of available credit, along with falling demand was cited as being largely responsible for the pessimism. So there’s still no sign of light at the end of the property tunnel, unfortunately, but there’s no great surprise in that either.