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Construction activity contraction slows in May

Construction activity continued to fall sharply in May but at a softer pace than in April, the latest Ulster Bank Construction PMI survey shows today.

The Purchasing Managers’ Index, which tracks changes in total construction activity, posted a reading of 19.9 in May.

This was up from 4.5 in April as the construction sector opened up again after coronavirus shutdowns.

A figure above 50 signals an increase in activity on the previous month and a figure below 50 signals a decrease. May marked the third month in a row where the index had remained below the 50 figure.

Ulster Bank said that activity decreased across all three broad categories covered by the survey – housing, civil engineering and commercial – although the rates of contraction eased in each case. 

The sharpest decline in May was seen was in civil engineering activity, while commercial posted the softest reduction.

Simon Barry, chief economist at Ulster Bank, said the pace of deterioration was easing as the headline PMI index rose from an all-time low of 4.5 in April to 19.9 in May reflecting the easing of restrictions on activity that took effect from May 18.

He said that while the New Orders and Employment indices remained firmly in contraction territory, respondents reported a less negative picture compared to April’s record declines. 

“Indications that at least the pace of deterioration eased last month following the easing of restrictions does lay the groundwork for clearer signs of outright recovery in the months ahead, depending of course on developments in relation to the virus itself,” Mr Barry said.

“Indeed, confidence among construction firms about the coming year picked up last month, leaving the Future Activity Index at a three-month high as over 37% of respondents anticipate an increase in activity over the coming year compared to 29.6% in April and 16.6% in March,” he added. 

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