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Sun April 11 2021

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New business grows sharply for Irish construction sector

15 Sep 15 Activity in Ireland’s construction sector continued to rise sharply during August amid a sustained growth of new business.

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There were further signs of a slowdown in growth in the output but, with new work rising again, companies continued to take on extra staff at a rapid pace.

The Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to track changes in total construction activity – posted 56.5 in August, down from 59.1 in July but still signalling a sharp monthly rise in activity. Total output has increased continuously throughout the past two years.

Simon Barry, chief economist Republic of Ireland at Ulster Bank, noted that: “The latest results of the Ulster Bank Construction PMI indicate that the Irish construction sector experienced a further solid rise in activity in August, albeit that the pace of growth moderated since July. The headline PMI fell for the second month in a row in August, but these declines are from what was the second-highest reading in the survey’s history in June. At 56.5, the overall PMI remains considerably above the threshold level of 50 which signals expansion. Similarly, solid, but somewhat slower, rates of expansion were also recorded in residential and commercial activity though a second consecutive decline in civil engineering activity highlights that this sub-sector remains a relatively weak spot.

“Other notable highlights from the August survey included encouraging strength in new orders where a further sizeable increase in new business levels augurs well for the sector’s near-term prospects. Against the background of the ongoing gains in activity and orders, construction firms are continuing to expand their staffing levels at a rapid pace. The latest official jobs statistics from the CSO indicate that construction was the fastest-growing sector of the economy in terms of job creation in the year to the second quarter. The July and August readings of the employment index of the PMI survey indicate that the sector has continued to generate strong jobs growth since then.”

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The commercial sector remained the best-performing of the three monitored categories in August, posting a substantial monthly increase, albeit the weakest since March. Growth of residential activity also eased for the second month running to the slowest in five months. Civil engineering activity decreased for the second successive month. Although modest, the rate of contraction was slightly sharper than that seen in July.

The availability of subcontractors deteriorated sharply again, with the rate of decline only marginally weaker than in July. This contributed to a further substantial increase in rates charged by subcontractors, in spite of a further deterioration in their quality.

A combination of new order growth and efforts to replenish stocks led to another rise in purchasing activity during August. The time taken by suppliers to deliver purchased items continued to lengthen.

August data signalled a further sharp increase in input prices, which panellists mainly attributed to the weakness of the euro against sterling having led to rises in the cost of imported items.

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