Growth in the Irish construction sector weakened during January, with activity and new orders slowing sharply from the end of 2014.

However, strong growth in employment continued and optimism within the sector improved to a near-record high, according to the Ulster Bank purchasing managers' index for the sector.

The seasonally adjusted index dropped to 57.1 in January, down from 63.1 in December.

This is the weakest increase in activity since February 2014.

However, but it is still well above the 50 level that marks the threshold between expansion and contraction.

Price inflation was little-changed in the construction industry last month, as reports of lower fuel costs were outweighed by exchange rate movements.

Solid pace

Ulster Bank chief economist for the Republic of Ireland

Simon Barry

said construction activity continued to expand “at a solid pace” in the early part of the year, despite the sharp fall compared to December.

“Slower growth was evident across the housing, commercial and civil engineering subsectors,” he said.

“While the loss of momentum in January is striking, the softening needs to be seen in the context of the exceptionally strong growth rates recorded through 2014 from which some pullback was always likely.”

However, the pace of jobs growth eased only slightly and remained strong, he added, while sentiment ticked up from December levels and was the second-highest in the series history.

The strongest monthly rise in activity was recorded in the area of commercial projects, while civil engineering activity rose for the fourth consecutive month.

A marked slowdown in the rate of growth in housing activity was recorded, with the latest rise the weakest since August 2013.