The Ulster Bank Construction Purchasing Managers鈥� Index (PMI) posted 44.0 in August, down from 53.2 in July and below the 50.0 no-change mark for the first time in three months.
The reading signalled a solid reduction in total construction activity, though the pace of decline was much softer than those seen during the worst of the recent downturn.
Some companies continued to see activity levels recover following the loosening of lockdown restrictions but this was outweighed by those firms reporting that uncertainty and general economic weakness had a negative impact on workloads.
Simon Barry, chief economist Republic of Ireland at Ulster Bank, said: 鈥淭he recovery in Irish construction activity showed signs of stalling in August according to the latest results of the Ulster Bank Construction PMI. Following two months of post -lockdown increases in聽 activity聽 in聽 June聽 and聽 July,聽 respondents聽 reported聽 that聽 overall聽 activity聽 slipped聽 back聽 into聽 contraction聽 territory last month, albeit that the pace of contraction was nowhere near as severe as during the peak聽 of the crisis in April and May.
鈥淭he weakness was broadly based, with each of the main sub-sectors reporting declining activity last month, while overall new orders also dipped having recorded very solid growth in July. Some firms have continued to report ongoing recovery in activity and orders, though in August this was more than offset by those who reported a drop. High levels of market uncertainty linked to the effects of the pandemic and some recent signs of a cooling in the wider economy鈥檚 recovery momentum weighed on the August results, including in relation to sentiment about the sector鈥檚 future prospects. Nonetheless, respondents continued to express optimism in the year-ahead outlook reflecting expectations that, despite some prominent risks and headwinds, the economy鈥檚 recovery will stay on track. Furthermore,聽 with leading indicators such as the housing commencements data continuing to point to further upside聽 for聽 housing聽 output,聽 we聽 would聽 be聽 surprised聽 if聽 the聽 housing聽 PMI聽 in聽 particular聽 doesn鈥檛聽 show聽 renewed聽 improvement in the months ahead.鈥�
All three categories of construction saw activity fall in August.聽 The sharpest decline was recorded on commercial projects, while housing activity decreased at the softest pace.
In line with the picture for activity, market uncertainty聽 as聽 a聽 result聽 of聽 the聽 COVID -19聽 pandemic聽 and聽 its 聽aftermath led new orders to tick down midway through聽 the third quarter. The solid reduction followed a return to growth in July.聽聽
Worries about the lasting impacts of the Covid-19聽 pandemic and signs of a renewed slowdown in the聽 economy聽 contributed聽 to聽 a聽 drop聽 in聽 confidence聽 regarding聽 the聽 12-month聽 outlook聽 for聽 construction聽 activity.聽 That said, sentiment remained positive overall, reflecting optimism that economic conditions will return to normal over the coming year.聽
Purchasing activity fell modestly in August, the first reduction in three months.聽 Meanwhile, suppliers鈥� delivery times continued to lengthen at a considerable rate, albeit one that was the softest since March.聽 Panellists reported that COVID -19 continued to cause disruption to supply chains, with particular issues when sourcing inputs from abroad.
Difficulties sourcing items contributed to a rise in input costs, according to respondents. Input prices increased for the fourth consecutive month, but the rate of inflation eased and was softer than the series average.
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