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Irish construction activity sees sharp rise

9 Aug 16 Ireland’s construction sector experienced a sharp expansion in activity in July, on the back of an accelerated increase in new orders.

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Rising workloads encouraged companies to take on extra staff and increase their purchasing activity.

The Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to track changes in total construction activity – rose to 61.0 in July from 59.7 in June. Total construction activity has now risen in each of the past 35 months.

Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, said: “The latest results of the Ulster Bank Construction PMI survey show another sharp increase in Irish construction, with the pace of expansion accelerating to a four-month high in July. Underpinning the further uplift in activity last month was a further significant increase in new business, with the new orders index also rising to its highest level since March. The robust advances in activity and new business once again resulted in higher employment levels, with the rate of job creation picking up to a five-month high in July. The strongest-performing sector last month was commercial, where growth picked up to its fastest since February, while housing activity also continued to rise at a sharp pace, albeit slightly slower than registered in June. Civil engineering activity continues to expand, but at a pace that remains some way slower than the other two main sub-sectors.

He added that the July survey results offer the first glimpse into Irish construction trends following the UK referendum. “The continuation of strong trends in overall activity and new business provide important encouragement that the sector’s recovery is maintaining solid momentum at present. It is important not to be complacent on this front, however. Uncertainty remains high about the extent of the possible adverse impact on the Irish economy from Brexit-related risks, even if the primarily domestic-focussed construction sector isn’t in the line of fire to the same extent as the more export-oriented manufacturing sector where recent trends have clearly deteriorated as Brexit effects have begun to take hold.”

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Although the usage of subcontractors continued to rise in July, the rate of expansion slowed sharply and was only marginal. Subcontractor availability continued to decline markedly, leading to a further rise in the rates they charged in spite of a drop in the quality of their work.

The performance of suppliers to companies in the Irish construction sector also deteriorated in July. That said, lead times lengthened only modestly and at a weaker pace than in the previous month.

Business sentiment remained strongly positive in July, despite having eased sharply from June’s near-record high. Exactly 58% of respondents predicted growth of activity over the next 12 months, with optimism reflecting expectations of increasing new business and improving economic conditions. On the other hand, 9% of panellists expected a fall in activity.

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