Construction sector activity continued to fall sharply last month, with job cuts hitting a record high, according to new figures from the Ulster Bank.

The bank's Construction Purchasing Managers' Index recorded 33.

Despite this representing a slight growth from July's 31.3, the figure is still well below the key 50 level, which separates growth from contraction.

According to the index, builders started work on just 510 new homes in Ireland during August.

The month is usually quiet for the sector, but compared to August 2007, the new work only provide 30% of previous volumes.

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The figure is one of the lowest in the last 12 years and industry commentators say it indicates that the construction slump is now likely to continue into 2010.

However, Pat McArdle, Chief Economist at Ulster Bank, said there were "tentative signs" that the picture may not be as bleak as it seems.

He said declines in the civil and commercial sectors had levelled off, with the commercial index moving up from 32.3 to 35, while civil engineering fell from 40 to 38.2.

Housing recorded 25.4, a slight increase from July's 23.2.

There was also some "welcome relief" on steel and fuel costs front, with prices reversing much of the previous month's rise.

The price falls were also supported by a reduction in rates charged by sub-contractors.

However, Mr McArdle said the massive August Live Register jump could be attributed to the construction sector, which experienced a record fall in employment.

He said firms remain pessimistic, with almost half expecting lower activity in 12 months' time.

(PR/JM)