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Sat December 07 2019

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Irish construction activity declines again

11 Nov There has been a decline in Ireland’s construction activity for a second consecutive month.

The pace of decline was the most marked since June 2013, according to the new figures from the Ulster Bank Construction Purchasing Managers’ Index (PMI). The seasonally adjusted index designed to track changes in total construction activity fell to 46.2 in October from 48.3 in September. The index for new orders also fell, from 50.8 in September to 48.8 in October, which was the first decrease since June 2013.

Ulster Bank chief economist Republic of Ireland Simon Barry said: “The latest results of the Ulster Bank Construction PMI survey showed a further loss of momentum in Irish construction activity last month. A decline in the headline PMI index, from 48.3 in September to 46.2 in October, signalled a second consecutive monthly decline in activity. Meanwhile, the detail behind the headline reading also painted a disappointing picture, with weaker activity patterns reported across all three main subsectors. Commercial activity decreased for a second month running in October and, similarly to the headline index, the pace of contraction quickened to its fastest since June 2013. More encouragingly, housing activity continues to grow, with its PMI reading of 51.3 still above the expansion threshold of 50. Housing remained the strongest sub-sector for a 10th month in a row, though the pace of residential activity growth has also softened materially in recent months and currently stands at a 4½ year low.”

 Respondents linked the decline in new orders to Brexit uncertainty as anecdotes from the survey highlight that concerns about Brexit impacts continue to weigh on activity and sentiment regarding the sector’s prospects for the coming year. “In this context, the recent easing of concerns regarding Brexit crash-out risk may offer some support for construction confidence and activity in the months ahead,” said Barry.

For the second month in a row, housing was the only monitored sub-category to observe an increase in activity during October. The rate of reduction of commercial activity quickened from September and was the fastest since June 2013. Civil engineering activity, meanwhile, declined for the fourteenth consecutive month, and at a sharper pace than in September.

Despite decreases in activity and new orders, Irish construction firms added to their headcounts in October. That said, the rate of job creation was marginal and matched the almost six-year low recorded in September. Anecdotal evidence from panellists indicated that extra staff had been hired in line with investment activity.

Purchasing activity among Irish construction firms returned to growth in October. The rate of expansion was only slight, however. Anecdotal evidence from panellists indicated that they had raised their input purchases in order to mitigate any supply disruptions from Brexit.

Optimism among Irish construction firms picked up from September to the highest in three months during October. Just over 31% of panellists expect activity to increase over the coming year.

Positive sentiment was linked to forecasts of improving economic conditions and new capital investment.

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