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Mon January 20 2020

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Irish construction returns to growth

6 days Ireland’s construction sector has experienced growth for the first time in four months.

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The Ulster Bank Construction Purchasing Managers’ Index (PMI) figure for December was above the 50.0 no-change mark at 52.0, up from 48.2 in November.

“The latest results of the Ulster Bank Construction PMI survey signalled a welcome return to expansion in Irish construction activity in December,” said Simon Barry, chief economist Republic of Ireland at Ulster Bank. “Indeed, following a three-month sequence of falling activity, the headline PMI index rose sharply last month to get back to above the 50 breakeven level for the first time since August. Reduced Brexit uncertainty was cited as a source of support for the increase in overall activity at the end of 2019, while the improvement also reflected better performance across the three main sub-sectors.

“Notably, a welcome pick-up in housing activity saw it return to expansion in December, offering some support for our view that the recent weakness in the Housing PMI was perhaps more reflective of large, adverse, Brexit-related moves in business sentiment than of marked weakness in actual underlying housing activity. Meanwhile, commercial activity saw a further acceleration in its rate of expansion last month, in the process remaining the fastest-growing subsector.

“Overall, following disappointing readings over the previous three months, the pick-up in the December PMI is an encouraging sign that construction growth regained some growth momentum as 2019 drew to a close. And other details within the survey also offered encouragement. A notable pick-up in new orders left the December reading back in positive growth territory, while respondents also indicated faster growth in demand for construction workers, with the pace of job creation rising to a six-month high in December.

“Moreover, the Future Activity Index rose to a six-month high in December, as confidence about the sector’s future prospects is being underpinned by expectations for availability of new projects in early 2020, while reduced uncertainty around Brexit was also cited as a source of support for the outlook.”

Housing activity rebounded in December, rising modestly following a first decline in almost six-and-a-half years in November. The sharpest expansion in activity was recorded on commercial projects, however, as the rate of growth accelerated from the previous month. Civil engineering activity continued to fall, albeit at a much softer pace and one that was the weakest since last May.

Irish construction firms gained confidence at the end of the year, with optimism rising to a six-month high in December. Some panellists that forecast activity to rise over the course of 2020 mentioned that they expect new projects to commence in the coming months, while others indicated that reduced uncertainty around Brexit should help to support growth.

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MPU

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