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Irish construction dips in July

The sector's sharpest contraction since September 2011.

The Ulster Bank's seasonally adjusted purchasing managers’ index (PMI) for construction in the Republic of Ireland reached 42.2 in July, compared to 42.5 in June. This marks the 62nd month of contraction in a row and the sharpest since September 2011.

A reduction in new orders and a decline in new business led to a dip in purchasing activity in July. Input prices decreased for the first time since April 2010.

Simon Barry, chief economist for Republic of Ireland at Ulster Bank, said:

The latest reading of the Ulster Bank Construction PMI paints a downbeat picture of the Irish construction sector as the second half of the year got underway. The headline index of overall activity fell for a second consecutive month to stand at a 10-month low in July.

At 42.2, the July PMI is some distance from the break-even level of 50, thus indicating that the sector continues to be characterised by widespread declines in activity. There was a slight easing in the pace of decline in housing activity, but activity fell at a sharper pace in both the commercial and civil engineering sub-sectors, with the latter recording the weakest performance of the three sub-sectors in July.

Near-term prospects for the construction sector do not look encouraging. 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.

Order levels contracted at their fastest pace since February 2010 last month, as firms reported a lack of demand for new work and strong competition for available business as key challenges. 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.