The rate of decline in the Irish construction industry is slowing, despite an acceleration in the pace of job cuts, according to the latest construction Purchasing Managers' Index from Ulster Bank.

The index rose for the second month in a row to 37.9 in July from 36.3 in June. This was the slowest contraction in the sector since November 2007, but Ulster Bank pointed out that the fall was still considerable. Any figure above 50 signals growth, while below 50 signals contraction.

Activity and new business in the construction sector both fell substantially, while the pace of job cuts in the sector accelerated. Employment has now fallen continuously since May 2007.

Each of the three broad sectors monitored by the survey posted declines in activity last month. The sharpest contraction was in the residential category, where the pace of decline increased.

Ulster Bank says the reduction in activity on civil engineering projects slowed in July, but remained substantial. And although commercial activity fell sharply over the month, the sector was the best performing of the categories as the rate of contraction eased to its weakest since April 2008.

For the second month in a row, expectations regarding future activity were broadly neutral. The survey revealed that a number of firms forecast rising activity over the next 12 months as economic conditions improve.

“Nonetheless, a decline in the employment index this month acts as a reminder that conditions in the sector, especially housing, remain very challenging at present,” commented Simon Barry, senior economist at Ulster Bank.