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Tue December 01 2020

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Irish construction activity continues to rise

9 Dec 13 The Irish construction sector has again recorded strong growth of activity and new orders as the recovery in the sector continued in November.

A marked pick-up in the rate of job creation was seen during the month and business sentiment was the highest since the Ulster Bank Construction Purchasing Managers’ Index (PMI) survey began in June 2000. The seasonally adjusted index is designed to track changes in total construction activity and remained well above the 50.0 ‘no-change’ mark in November. It posted 58.8, down from 59.4 in October. Construction activity has now risen in three successive months. Anecdotal evidence suggested that rising new business amid improving market conditions had supported the latest increase in activity.

Commenting on the survey, Simon Barry, chief economist Republic of Ireland at Ulster Bank, said: “The November results of the Ulster Bank Construction PMI survey confirm that activity trends in the Irish construction sector continue to improve. The headline PMI index did fall slightly last month, but at 58.8 it remains well above 50, signalling solid ongoing expansion in activity levels. In keeping with the pattern of the last several months, the improvements are being underpinned by recoveries in both the housing and commercial arenas where activity has now increased in each of the past five and four months respectively.

“Near-term prospects for the sector appear favourable, judging by a further acceleration in the rate of growth of new business. The new orders index reached its highest level in over seven years as firms reported higher demand both at home and abroad, in the process spurring a third consecutive monthly rise in employment. Moreover, optimism levels of survey respondents reached their highest levels since the survey began in 2000, helped by the recent improvements in construction activity and orders, and in the wider economy. Of course activity levels in construction remain extremely low following the 2007-13 crash. So, to reiterate a point we have made previously, the recent improvements in construction activity and confidence - as welcome as they are - need to be seen in the context of the huge declines of recent years.”

Activity on both housing and commercial projects rose strongly again during November, with rates of expansion easing only slightly from the previous month. Civil engineering continued to see a fall in activity, although the pace of reduction remained much slower than earlier in the year.

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The current expansion in new orders at Irish construction firms lengthened to five months. Moreover, the rate of growth continued to accelerate and was the sharpest since October 2006. Respondents indicated further success in securing new contracts both in Ireland and abroad.

Rising new business led companies to take on extra staff in November. Furthermore, after having been marginal in the previous two months the rate of job creation quickened to a solid pace.

A third consecutive monthly increase in purchasing activity was recorded in November, with the rate of growth in input buying quickening to the fastest since June 2006. According to panellists, the rise stemmed from growth of new work. Construction firms in Ireland recorded a further lengthening of suppliers’ lead times, although the rate of deterioration eased to the weakest in 19 months. The rate of input cost inflation remained marked in November amid reports from panellists of increased timber prices and higher energy costs.

Almost two-thirds of respondents forecast growth of activity over the coming year. This helped optimism in the sector reach a record high, surpassing the previous record from July 2000. Positive sentiment reflected the number of new projects under way, the prospect of further new order growth in coming months and a general sense of optimism in the economy.

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