A monthly barometer of the construction industry shows that the sector contracted sharply in December with records falls in activity, new orders and employment.

The Ulster Bank Construction Purchasing Index now stands at 35.7, the lowest reading since the bank began to track the sector in June 2000. Any figure below 50 indicates the sector is contracting. Firms surveyed said the substantial decline in activity was a result of current projects being finished and a "lack of new work to replace them".

Pat McArdle, chief economist with Ulster Bank, said house completions are declining at record rates.

"As housing is two-thirds of construction, this dragged overall construction activity into negative territory since mid-2007," said Mr McArdle. "However, December was unusual in that the other two components - commercial and civil - also contracted."

He said the fall in civil activity was surprising given the priority status given to the National Development Plan in the Budget.

Housing activity is now at 23.5, commercial is at 45.6 and civil engineering is at 45.4 - its first negative reading after two months of growth. The drop in commercial activity in December was its sharpest for almost four and a half years .

Mr McArdle said that while the outlook "remains poor", confidence is still above the lows of 2001 and 2003.

"It remains the case that the more drastic the curtailment of housing activity, the sooner the existing backlog will be cleared, allowing activity to resume," he added.

The drop in new orders was the biggest in the survey's history, with more than one-third of firms noting a fall, which resulted in staff numbers also falling at a record rate for the survey.