THE TROUBLED Irish construction sector continued to contract sharply in November, while in Northern Ireland there was a record fall in business activity last month, new economic data shows.
Ulster Bank's purchasing managers' index (PMI) for the Republic's beleaguered construction industry signals that activity declined at close to record levels, with "very low" levels of housebuilding during the month.
Staffing levels at Irish construction firms fell at a "marked" rate in November, although the rate of job shedding eased on the previous months.
Ulster Bank economist Pat McArdle said the industry's problems were unlikely to be solved any time soon, given the overhang of unsold property and lack of buying activity.
"It is also now clear that both government and commercial activity are declining," he added.
The decrease in commercial construction activity in November was the second sharpest since data was first collected in June 2000. The civil engineering sector contracted for the 12th month in a row, although the pace of reduction in this sector was slower.
Mr McArdle said "the only piece of comfort" in the data was deflation in input prices such as labour, fuel, steel and timber, as well as in any input that is imported from the UK due to the strengthening of the euro against the pound.
The construction sector is suffering all across Europe, with industry body Euroconstruct forecasting a contraction of 2.5 per cent in 2008 and 4.3 per cent in 2009.
"These revised forecasts point to the most difficult years for the European building sector since the early 1980s," Davy Research construction analysts Barry Dixon and Flor O'Donoghue said in a note to investors.
Demand for cement - which is manufactured by Ireland's largest publicly quoted company, CRH - is forecast to decline by over 6 per cent next year.
This will lead to an erosion of profit margins for cement manufacturers, but the impact on CRH will be limited because one-third of its capacity is in the fast-growing markets of Poland and Ukraine, Davy Research said.
Meanwhile, there was a record fall in the number of new orders received by firms in the North in November, according to a separate Ulster Bank report.
Northern Ireland companies suffered a sharp drop in the level of output, new business activity and backlogs of work last month, with the rate of contraction in overall business activity the fastest since records began in 2002.
The latest data also highlights evidence of an increase in redundancies by private sector firms and a "particular weakness" in the manufacturing and retail sectors.
Richard Ramsey, Northern Ireland economist with Ulster Bank, said manufacturing companies were running down outstanding work at a record rate, which did not bode well for 2009 employment prospects.
