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Wed July 18 2018

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Ireland sees further sharp growth in construction

10 Jul Ireland's construction sector has experienced another month of growth in new business, with employment numbers also ticking up.

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June saw further sharp growth of construction activity in Ireland, reflecting another month of increasing new business. Rising workloads encouraged companies to step up hiring.

Meanwhile, the rate of input cost inflation eased to a nine-month low. The Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to track changes in total construction activity – posted 58.4 in June, thereby signalling another sharp monthly increase in construction activity in Ireland. This was despite the index dipping from May’s 61.8 to a three-month low. Total activity has now risen in each of the past 58 months.

Simon Barry, chief economist Republic of Ireland at Ulster Bank, said: “Irish construction firms continued to experience very solid, though slightly slower, growth in June according to the latest results of the Ulster Bank Construction PMI survey. The headline PMI eased back from what was an extremely elevated reading in May to stand at 58.4 in June but this is still very much a level which signals ongoing rapid gains in activity. The latest results, as well as anecdotes from survey respondents, continue to highlight that housing and commercial remain areas of particular strength within the sector, albeit that there was some cooling of growth momentum in June from the exceptionally rapid rates recorded in May. Other elements of the survey also painted a very positive picture, with the pace of job creation quickening further while new business also rose at a very rapid rate, barely slower than last month’s one-year high.”

He added that confidence among firms about year-ahead prospects for construction remains very elevated, with 56% of respondents expecting activity to rise.

He pointed out that other new figures show that the rate of new business formation in construction more than doubled over the period 2010 to 2016. More than 4,600 construction start-ups accounting for almost a quarter of all start-ups across the Irish business sector in 2016 - the latest year available. “Moreover, the start-up rate in construction is now the highest of the business economy’s three main sectors, having – unsurprisingly – been the lowest during the crisis. We estimate a 9.1% start-up rate in construction in 2016, significantly ahead of the equivalent rates in industry (7.7%) and in the broad services sector (7.3%) – a clear indication of expectations for recent construction sector outperformance to continue.”

A number of respondents linked higher activity to improving economic conditions, with particular strength in the housing and commercial sectors. This anecdotal evidence was backed up by survey data, with rates of growth in both housing and commercial activity substantial at the end of the second quarter.

On the other hand, activity on civil engineering projects decreased for the second month running.

Some panellists reported that new housing projects supported growth of new orders in June. New business rose at a substantial pace, and one that was only slightly slower than May’s one-year high.

Employment increased again in June, extending the current sequence of job creation to 58 months.

Moreover, the pace at which staffing levels rose was faster than in the previous month. Respondents indicated that increased demand led them to take on extra staff.

Rising demand also led to an expansion of purchasing activity, with input buying up sharply over the month. Higher demand for inputs contributed to longer suppliers’ delivery times. Shortages of some materials and transportation issues in Europe were also reportedly behind the latest deterioration in vendor performance, which was the most marked in three months.

 

MPU

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