Irish construction activity quickens to six-month high

January 17, 2018 / Isla MacFarlane
Irish construction activity quickens to six-month high

Growth of activity quickens to six-month high Irish construction activity increased at a faster pace during December amid strong growth of new orders. Rises in employment and purchasing were also recorded, while confidence regarding the 12-month outlook improved.

Inflationary pressures remained elevated, with input costs increasing to the greatest extent in six months. The Ulster Bank Construction Purchasing Managers’ Index® (PMI® ) – a seasonally adjusted index designed to track changes in total construction activity – rose to 58.0 in December from 56.7 in November.

The latest reading signalled a substantial monthly rise in construction activity at the end of 2017, and one that was the sharpest since June. Higher new orders amid improving economic conditions were mentioned by panellists as supporting output growth.

Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, said, “The latest results of the Ulster Bank Construction PMI survey show that Irish construction firms experienced strong, and faster, rates of expansion in December. The headline PMI picked up for the second month in a row, with a very elevated reading of 58 marking a six-month high.

“Housing was again the strongest-performing sector in an encouraging sign that residential activity continues to increase at a substantial and accelerated pace. But the improvement was broadly-based, with Commercial activity also rising at a rapid rate, while there was a welcome return to growth for Civil Engineering after six months of declining activity. Respondents reported that employment growth remains solid, albeit that the pace of hiring eased to its slowest pace since March 2015. A robust and strengthening pattern of new orders (which picked up to a four-month high) should underpin further gains in both staffing levels and wider activity in the months ahead.

“Overall, the Construction PMI is the latest indicator to paint a decidedly upbeat picture of the economy’s performance at the end of last year. It follows on from strong readings in a variety of other data points of late which have included the Services and Manufacturing PMIs, retail sales, housing supply and household income – all of which highlight that the Irish economy looks to be carrying considerable momentum into the early part of 2018.”

Increases in activity were recorded across all three monitored categories, with civil engineering seeing an expansion for the first time in seven months. The strongest growth was again seen on housing projects, where the pace of increase was the fastest since June. Commercial activity also rose at a sharper pace during the month.

The particular strength of the housing sub-sector was also mentioned by anecdotal evidence from respondents. New orders for housing projects, alongside improving economic conditions, contributed to a sharp overall increase in new business. Moreover, the rate of expansion quickened to a four-month high. Employment growth eases Rising workloads led constructors to increase both their staffing levels and purchasing activity during December.

The rate of job creation was solid, but slowed to the weakest in 33 months. Meanwhile, the rate of growth in purchasing activity remained sharp and was only slightly slower than November’s five-month high. Suppliers’ delivery times lengthened again at the end of the year, with rising demand for inputs reportedly causing pressure on supply chains. The rate of input cost inflation picked up in December, with the latest rise the fastest since June.

Alongside increases in the prices of materials such as insulation and steel, panellists also reported higher costs for fuel, insurance and staff. Improving conditions in both the construction sector itself and the wider economy supported confidence among firms that activity will increase over the coming 12 months. Moreover, optimism rose to a three-month high.

Did you like this? Share it: