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Mon May 17 2021

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Irish construction growth slows

11 Sep 17 Ireland’s construction activity continues to experience marked growth but the pace has slowed to a 29-month low.

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There were slower rises in both activity and new orders recorded in the latest figures from the Ulster Bank Construction Purchasing Managers’ Index (PMI), a seasonally adjusted index designed to track changes in total construction activity.

Despite the easing of growth, rates of expansion remained marked and firms upped their rate of job creation.

The PMI dipped for the third successive month in August, posting 55.1 from 56.6 in July. Although signalling a further sharp rise in activity, the reading was the lowest since March 2015.

Ulster Bank chief economist Republic of Ireland Simon Barry said that the construction sector continued to experience solid, though slightly slower, growth in August. “However, at 55.1, last month’s reading remains well above the 50 break-even level and indicates that firms continue to report widespread expansion. That is notably the case in relation to both the housing and commercial sub-sectors, with a further sharp monthly increase in residential activity leaving housing as the best-performing sector last month. However, civil engineering remains an area of weakness with respondents reporting a third consecutive monthly decline in activity.

“While the overall story remains one of continuing construction sector expansion, the latest PMI readings suggest that momentum behind the recovery has slipped a little - a trend that bears watching in the months ahead. One important reason not to be overly concerned about near-term prospects is the very healthy pattern of new orders that remains very much in place: the new orders index again showed strong growth in new business levels in August.”

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These gains in actual and prospective activity continue to underpin rapidly-rising demand for labour within the sector, with the employment index quickening for the second month running in August, he said. “The August survey also featured an update of a special question we ran at the same time last year regarding firms’ views about the possible impact of Brexit. As was the case last year, most (two-thirds of) firms see no change in activity over the coming year as a result of Brexit, with broadly similar proportions of respondents expecting activity to be boosted or reduced over the next 12 months.”

As was the case with total activity, the rate of expansion in new orders eased in August. The latest increase was still substantial, however, amid reports from panellists of improving activity within the sector. New business has now risen in each of the past 50 months.

In contrast to signs of slower growth in activity and new orders, employment increased at a faster pace during August.

Input prices rose sharply, largely due to higher raw material costs. That said, the rate of inflation eased to a nine-month low as sterling weakness versus the euro led to reduced prices for items sourced from UK suppliers. Suppliers’ delivery times lengthened at a considerable pace again in August, largely reflecting raw material shortages.

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