Irish Construction activity on the rise

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The latest Ulster Bank Construction PMI® has revealed the sector has made a strong start to 2018, with activity rising at its fastest pace in eight months during January.

The sector has seen not only activity rising, but new orders, employment and confidence have received a boost as well, while input costs rose to the greatest extent in 11 years.

The Ulster Bank Construction Purchasing Managers’ Index® (PMI®) – the seasonally adjusted index designed to track changes in total construction activity – saw activity rise to 61.4 in January from 58.0 in December.

Construction activity in Ireland has been consistently rising since September 2013, with this latest reading showing a substantial monthly increase, the fastest since May 2017. Respondents to the survey have linked the latest expansion with a jump in new contracts.

Steep expansions have been reported in civil engineering, housing and commercial subsectors, with commercial posting the strongest growth at the start of 2018.

These rising workloads have led construction firms to increase their staffing levels again, a trend started in 2013, however the rate of job creation was sharp and the fastest since last August.

January data pointed to a sharp and accelerated monthly increase in input costs, with the latest increase the fastest since January 2007. A number of panellists mentioned that suppliers had raised their prices, while higher costs for fuel and labour were also reported.

Confidence in the sector continues to rise, reflecting expected improvements in conditions both in the wider economy and construction industry itself, as well as the prospect of further increases in new contracts. More than 53% of panellists forecast a rise in activity over the coming year.

Commenting on the survey, Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, noted that: “The latest results of the Ulster Bank Construction PMI survey paint a very encouraging picture of early-year activity trends in Irish construction. The headline PMI picked up for the third month in a row, with a highly elevated reading of 61.4 representing an eight-month high. There was a particularly notable acceleration in Commercial activity making it the fastest growing sector last month. However, the improvement was broadly-based, with the Housing PMI also rising to an eight-month high, consistent with ongoing very rapid activity growth. In addition, there were further welcome signs of improvement in Civil Engineering which logged a second consecutive month of expansion, with a 55.6 reading marking the best performance for that sub-sector in almost two years.

“Other detail within the report confirms the positive signals from the headline indicator. Notably, the New Orders index picked up again leaving it in line with the robust average pace of increase recorded to date in the recovery. And the strength of trends in current and prospective activity continues to underpin solid labour demand, with the Employment index rising to a five-month high. Overall, the January PMI indicates that, like their services and manufacturing counterparts, Irish construction firms have made a strong start to 2018. Moreover, construction firms are looking to the year ahead with high levels of confidence, with sentiment around future prospects buoyed by expected further improvements in the wider economy and in the construction industry itself.”

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