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Sun August 09 2020

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Irish construction starts to bounce back

13 Jul Ireland has seen the first rise in construction activity since coronavirus hit its economy.

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The Ulster Bank Construction Purchasing Managers’ Index (PMI) posted 51.9 in June - the first time the survey has been above the 50.0 no-change mark in four months.

The reading was up substantially from May’s reading of 19.9.

Simon Barry, chief economist Republic of Ireland at Ulster Bank, said: “The latest results of the Ulster Bank Construction PMI survey signalled a welcome return to expansion in Irish construction activity in June. Notably, the headline PMI index rose sharply last month to get back to above the 50 breakeven level for the first time since the coronavirus hit the Irish economy.

“Mirroring the pattern of the headline PMI, all three sectoral sub-indices recorded sharp gains last month. This was particularly so in the case of housing as its PMI rose from 21.4 in May to a ten-month high of 55.8 in June, signalling a fast expansion in activity following the extreme weakness reported in recent months.”  

Commercial activity has also returned to positive growth in June as a marked improvement in survey responses left the Commercial PMI reading at a four-month high of 50.9.

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He added: “Overall, the June PMI is an encouraging sign that the construction sector is now more clearly in recovery mode following the easing of restrictions which took hold during May. Furthermore, a headline reading of 51.9 also signals construction outperformance relative to both the services and manufacturing equivalents (which stand at 39.7 and 51 respectively). And other details within the survey also offered some encouragement, with the New Orders and Employment indices both recording sharp trajectory improvement last month to stand at 46 and 43.3 in June, respectively.”

New business and employment both remained in contraction territory in June, but Barry said that the bank wouldn’t be surprised if these indicators return to expansion in the months ahead as confidence among construction firms about the coming year also continues to rise. “Indeed, firms reported a positive year ahead outlook for the first time in four months as over 39% of respondents anticipate higher output levels in the coming 12 months – a notable improvement from the recent low point in March when activity expansion was expected by fewer than 17% of firms,” he said.

Despite activity returning to growth at the end of the second quarter, firms continued to lower their staffing levels amid relatively low workloads. Employment levels fell sharply, albeit at a reduced rate.

Efforts to secure items were hampered by ongoing issues in supply chains due to the Covid-19 pandemic. Shortages of some inputs, reduced capacity at vendors and delays from UK suppliers all contributed to a steep lengthening of delivery times, and one that was unmatched prior to the current crisis.

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