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Job shedding intensifies in Ireland

11 Dec 12 Construction activity in Ireland fell sharply again in November as new orders declined at an accelerated pace.

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Job shedding also intensified during the month in line with reduced workloads, and firms lowered their input buying. Staffing levels have fallen in each month since May 2007.

The Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to track changes in total construction activity – remained unchanged at 42.6 in November, signalling a further sharp monthly reduction in activity. Respondents attributed the latest fall in activity to lower new orders and weak confidence.

“The November reading of the Ulster Bank Construction PMI indicates that business conditions remain very tough for Irish construction firms,” said John Fahey, economist Republic of Ireland at Ulster Bank. “The latest survey results show that while the pace of contraction in overall activity was unchanged from October levels, the reading of 42.6 indicates activity continues to fall sharply. From a sectoral perspective, the weakness recorded in November was broad-based, with all three of the principal sub sectors experiencing declining activity levels. The sharpest contraction was recorded in civil engineering, which retained its tag as the weakest of the three sectors, although both the housing and commercial activity indices continue to be some way below the expansion threshold of 50. Not surprisingly, given the ongoing contraction in activity, the sector remains in job shedding mode, and in fact the pace of contraction in employment levels was at its sharpest since May 2011.

“In terms of the outlook, a key headwind for the construction sector is the lack of new business opportunities,” he added. “The new orders index, an important lead indicator, fell at a faster pace compared to a month earlier and in the process registered its eleventh consecutive month of contraction.”

The provision in the Budget for the establishment of Real Estate Investment Trusts (REITs) may provide some support for the property sector over time, said Fahey. “Overall though, the near term prospects for the construction industry remain weak and the sector will continue to face a challenging outlook in the coming months.”

The civil engineering sector remained the worst performing of the three monitored sectors in November. Although the rate of contraction eased slightly, it remained substantial. The housing sector posted the weakest reduction during the month, with the rate of decline easing to the slowest since January. Meanwhile, commercial activity decreased at a sharp and accelerated rate.

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New business declined for the eleventh successive month in November, and at a sharp pace that was faster than seen in October. Fragile confidence was mentioned by some of those panellists that posted a drop in new orders.

With workloads continuing to fall, construction firms reduced their input buying and employment again. Purchasing activity decreased at a marked pace that was little-changed from the previous month. Meanwhile, the rate of job shedding accelerated to the fastest since May 2011.

A fourth successive increase in input prices was recorded during November, with panellists highlighting rising fuel costs. Moreover, the rate of inflation quickened to the sharpest since March and was faster than the long-run series average.

Reduced staff and stock holdings at suppliers contributed to a lengthening of delivery times during November. The solid deterioration was the seventeenth in as many months.

Sentiment among construction firms remained subdued, mainly as a result of the ongoing weakness in market conditions. Overall, slight optimism regarding the 12-month outlook for activity was recorded, but sentiment was below the long-run series average. Where a rise in activity was forecast, this mainly reflected expectations of growth in overseas work.

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