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The construction sector contracted further in the first quarter of 2012 but the rate of decline in activity slowed last month according to figures released today.

The latest construction purchasing managers index compiled by Ulster Bank rose to 46.7 in March from 42.1 in February.

The latest reading pointed to a further reduction in activity, albeit the slowest in 2012 to date. Respondents linked the fall in activity to fragile confidence among clients.

The slowest reduction in activity was again recorded in the commercial sector, although the rate of contraction quickened in March. Activity in civil
engineering projects continued to fall substantially, while housing activity decreased at a broadly similar pace to that seen in February.

There was a further reduction in employment in the sector but again the decline slowed. 

Each of the main construction sub-sectors continued to witness ongoing contraction with civil engineering recording the sharpest decline. Commercial activity is holding up in a relative sense according to the report.

Chief Economist at Ulster Bank Simon Barry some of the forward-looking elements of the survey offer some tentitive encouragement.

The New Orders index rose in March, and has returned very close to the breakeven mark of 50 – a level at which it has been bobbing around for most of the
past six months, hinting that the multi-year slump may finally be giving way to a less negative pattern.

"Moreover, sentiment rose last month to its highest level in over five years as more firms reported a belief that activity would be higher in 12 months’ time, though the uptick in confidence is probably more a reflection of how far activity has fallen than expectations of a sharp recovery any time soon.”