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Sun September 23 2018

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Growth quickens in Irish construction

16 Jan The growth of Irish construction activity increased at a faster pace during December to reach a six-month high.

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Confidence regarding the 12-month outlook improved and there was strong growth of new orders, with rises also recorded in employment and purchasing. Inflationary pressures remained elevated, with input costs increasing to the greatest extent in six months.

The Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to track changes in total construction activity – rose to 58.0 in December from 56.7 in November. Readings above 50 indicate growth.

Simon Barry, chief economist Republic of Ireland at Ulster Bank, said: “The latest results of the Ulster Bank Construction PMI survey show that Irish construction firms experienced strong, and faster, rates of expansion in December. The headline PMI picked up for the second month in a row, with a very elevated reading of 58 marking a six-month high. Housing was again the strongest-performing sector in an encouraging sign that residential activity continues to increase at a substantial and accelerated pace. But the improvement was broadly-based, with commercial activity also rising at a rapid rate, while there was a welcome return to growth for civil engineering after six months of declining activity. Respondents reported that employment growth remains solid, albeit that the pace of hiring eased to its slowest pace since March 2015. A robust and strengthening pattern of new orders (which picked up to a four-month high) should underpin further gains in both staffing levels and wider activity in the months ahead. Overall, the Construction PMI is the latest indicator to paint a decidedly upbeat picture of the economy’s performance at the end of last year.

The particular strength of the housing sub-sector was mentioned by anecdotal evidence from respondents. New orders for housing projects, alongside improving economic conditions, contributed to a sharp overall increase in new business.

Rising workloads led constructors to increase both their staffing levels and purchasing activity during December. The rate of job creation was solid, but slowed to the weakest in 33 months. Meanwhile, the rate of growth in purchasing activity remained sharp and was only slightly slower than November’s five-month high.

Suppliers’ delivery times lengthened again at the end of the year, with rising demand for inputs reportedly causing pressure on supply chains.

The rate of input cost inflation picked up in December, with the latest rise the fastest since June. Alongside increases in the prices of materials such as insulation and steel, panellists also reported higher costs for fuel, insurance and staff.

Improving conditions in both the construction sector itself and the wider economy supported confidence among firms that activity will increase over the coming 12 months. Moreover, optimism rose to a three-month high.


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