Activity in the construction sector slows in July

Activity in the construction sector slows in July

Activity in the construction sector continued on a positive footing in July, but growth slowed to its slowest pace in almost six years.

The latest construction purchasing managers’ index from Ulster Bank shows that growth in activity in the housing sector slowed to its lowest pace in half a year during July.

The commercial sector saw activity grow at a faster pace than in June, while civil engineering recorded a deeper contraction.

During July the PMI stood at 51.4 – compared to a reading of 53.1 during June.

New orders continued to grow during the month, according to the survey, though the rate was its slowest since February 2015.

Meanwhile employment growth eased to its weakest since March 2015.

All of that dented confidence, which fell to a 74 month low, however 31% of surveyed firms expected activity to rise over the next year.

“The overall message is that activity is increasing, but at a slower rate,” Simon Barry, chief economist with Ulster Bank said.

The housing sector – while remaining the strongest sector within the industry – showed signs of cooling in the month with growth slowing to a six month low.

“We’re seeing housing starts weaken. The growth rate turned negative in the last few months. It might be that the pace of underlying demand isn’t as rapid as people presumed.

“It may also be a supply response. Firms may be observing a deceleration in house price growth given ongoing strength in cost inflation that could be having an adverse impact as they weigh up the selling price against the cost of production.”

On Brexit, Simon Barry said it wasn’t having an impact to the same extent as other sectors that were more internationally traded, but he said there was likely a knock-on impact.

“We did pick up on firms reporting adverse Brexit impacts. It could be that we’re picking up on a general sense of uncertainty more broadly and that’s trickling down into other sectors, including construction.

“It could also be that firms had succeeded in achieving diversification during the downturn and had success in the UK market and maybe some of the weakness that we’ve seen in the UK market could be feeding back into those firms,” he explained.

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