Ulster Bank Construction PMI®: Further Steep Decline in Activity, But Confidence Hits One-Year High

The Ulster Bank Construction PMI (Purchasing Managers’ Index®) – a seasonally adjusted index designed to track changes in total construction activity – remained well below the 50.0 no-change mark in February, despite rising to 27.0 from 21.2 in January, signalling a softer pace of reduction. Index readings above 50 signal an increase in activity on the previous month and readings below 50 signal a decrease. Respondents indicated that the coronavirus disease 2019 (COVID-19) lockdown restrictions had been behind the decline in activity.

“The New Orders index also remained firmly in contraction territory in February thus signalling that activity is likely to remain under significant pressure in the near-term amid the ongoing restrictions which will continue to depress activity in March. However, despite the extent of the current challenges facing the sector, the February results were also notable for a sizeable pick up in confidence about the outlook further ahead. Sentiment picked up to its highest level in twelve months as almost half of surveyed firms anticipate an expansion in activity over the year ahead, with confidence bolstered by expectations for a release of pent-up demand as headwinds from the pandemic fade.”

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Widespread reductions in activity
The three monitored categories of construction all continued to record sharp contractions in activity, albeit with housing and commercial work falling at softer rates than at the start of the year.

New work down sharply again
In line with the picture for construction activity, new orders continued to fall sharply during February due to the COVID-19 lockdown. More than half of all respondents signalled a reduction in new business.

While activity and new orders decreased substantially again, there was growing confidence that the coming year would see an expansion in activity amid the release of pent-up demand once the pandemic comes to an end. In fact, optimism strengthened to the highest since February last year. Around 48% of companies predicted an expansion of activity.

Those firms that did purchase inputs during the month were faced with delivery delays and rising prices. Suppliers’ delivery times lengthened to a slightly lesser extent than January’s survey record, but one that was considerable nonetheless. Brexit was the principal factor for delivery delays, according to panellists, while there were also some mentions of supply-chain disruption due to the pandemic.

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