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Irish construction ends 2016 on a positive note

16 Jan 17 Activity in Ireland’s construction sector continued to rise sharply at the end of 2016 amid a faster expansion of new orders.

construction activity from 2000 to the end of 2016 (click to enlarge)
construction activity from 2000 to the end of 2016 (click to enlarge)

Rates of job creation and growth of purchasing activity remained substantial and firms were strongly optimistic that activity would increase further in 2017. That said, the rate of input cost inflation accelerated sharply to the strongest since March 2007.

The Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to track changes in total construction activity – posted 58.9 in December, down slightly from the reading of 59.8 in November but still signalling a substantial monthly increase in activity. Construction activity has now risen in each of the past 40 months, with panellists mainly linking the latest expansion to higher new work volumes.

Ulster Bank chief economist Republic of Ireland Simon Barry said: “Both the residential and commercial sub-sectors remain particular sources of strength for survey respondents, with activity in both categories continuing to rise at rapid rates, albeit slightly less rapid than was the case in November. Civil engineering remains an area of weakness, however, with activity here decreasing for the second month running.

“Overall, the December survey results round off another strong year of recovery for Irish construction firms, with the PMI consistently pointing to ongoing healthy expansion throughout 2016. Moreover, momentum behind the sector’s recovery continues to look encouragingly solid, with a marked pick up in new orders in December indicating that activity trends look set to remain positive in early 2017.

Furthermore, firms themselves remain strongly optimistic about the coming year with almost two thirds of respondents expecting further growth in activity in the coming 12 months. “

New orders have risen continuously throughout the past three-and-a-half years, with December seeing a strong monthly expansion that was faster than recorded in November.

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Rising workloads led construction firms to increase their staffing levels again at the end of the year. Moreover, the rate of job creation remained substantial and was broadly in line with the nine-month high seen in November.

Likewise, firms increased their purchasing activity sharply, extending the current sequence of growth to 34 months.

The rate of input cost inflation accelerated sharply during December and was the fastest since March 2007. Panellists reported higher prices for raw materials and manufactured goods.

A further deterioration in the performance of suppliers to the construction sector was recorded, with the latest lengthening of lead times the greatest in 10 months.

Business sentiment improved at the end of the year and was strongly positive. According to respondents, improvements in the construction sector and wider Irish economy are set to help lead to growth of activity over the coming year.

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