Construction growth slows in July

Activity in the Irish construction sector remained strong in July, although not as buoyant as in previous months.

However, activity in the civil engineering sector which is strongly influenced by Government public infrastructure projects, continued its recent decline, according to data from the Ulster Bank construction purchasing managers' index for July.

"While this sector did well in 2004, it treaded water in the first half of this year and in recent months is displaying outright contraction," said Ulster Bank chief economist Pat McArdle.

Civil engineering recorded a reading of 45.6, down from 48.4 in June and its lowest level since late 2003. Any figure below 50 denotes contraction while a figure above that level indicates expansion.

"It appears that major public sector infrastructure projects recently completed have not been replaced and the civil engineering sector is contracting instead of expanding," Mr McArdle said.

He warned that a continuation of the trend would see the Government public capital programme recording a "major undershoot" in spending again this year.

Overall, the seasonally adjusted index gave a reading of 55.6 for the construction sector, down slightly on the 56.6 recorded in June but still indicating significant growth in what has been a booming sector of the economy.

Activity in the commercial sector was particularly bullish, with a reading of 60.4 against a figure of 57.5 in June. In the residential sector, the July figure of 55.7 was down slightly on the June reading of 57.5.

Mr McArdle said there were signs that the "pre-summer burst of activity" in the residential construction sector may have run its course as "house price inflation continues to edge down and supply and demand come closer to balance".

Respondents reported "robust" growth in new business in July, continuing the strong rate of job creation in the sector.

Purchasing activity by firms strengthened in the month but there was evidence of pressure on suppliers and costs. Having eased throughout the second quarter, the reading for input costs jumped back above 60 last month.

The outlook of companies in the sector remained bright in July, according to the report, driven in part by market demand and the expectation of new public service contracts.