Construction orders rise for first time in 19 months

A new survey shows that the decline in the construction industry may finally be slowing.

This is according to the Ulster Bank Purchasing Managers Index, which examines the state of the sector every month.

The index for July shows new orders returning to growth – a key indicator of future activity in the industry. It also shows that purchasing activity and employment, while not back to growth, are showing lower rates of decline.

The overall index for July came in at 47.5.

While it is still below the break-even 50 mark, it is well up on the 43.4 recorded in June and it reflected the slowest fall in activity since December 2011.

Activity on housing projects increased in July, ending an 18 month period of contraction. While activity continued to fall in the commercial and civil engineering projects, the rate of decline eased.

Rising new orders led to a slowdown in the rate of jobs cuts last month. Although employment continued to fall at a ”solid pace”, the rate of decline slowed to the weakest level since February.

Ulster Bank pointed out that staffing levels in construction companies have fallen every month since May 2007.

The cost of input inflation eased for the fifth month in a row, and was the slowest in the current 12 month long sequence of rising input prices.

Although slipping slightly from June, solid optimism was recorded at construction companies in July. Almost 43% of companies surveyed said they predict activity growth over the coming year, on the back of improved confidence in the sector and the prospect of further rises in new business.

”Last month we noted the less negative trends in new business in June. But this has given way to an outright increase in order levels in July as the index broke through the key 50 level – indicating expansion – as 35% of firms reported higher orders levels compared with 24% reporting declines,” commented Ulster Bank’s chief economist Simon Barry.

The economist said that the return to expansion in new orders, if sustained, should promote greater stability in overall activity trends in the period ahead.