Irish construction experiences sharp increase in activity

Activity in Ireland’s construction sector increased at a sharper pace in July amid widespread reports of strengthening demand for services.

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New orders continued to increase at a substantial pace and companies raised employment and purchasing activity accordingly, according to the Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to track changes in total construction activity. Meanwhile, the rate of input cost inflation remained marked amid some reports of material shortages.

The PMI rose to 60.7 in July from 58.4 in June. The reading signalled a fifty-ninth consecutive monthly rise in construction activity, and one that was sharper than in the previous month. Respondents pointed to increases in new work and specific strength in the housing sector.

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 accelerated rates of expansion in July. The headline PMI picked up from what was already a highly elevated reading of 58.4 in June to stand at 60.7 last month, a level consistent with very rapid growth in activity. Firms continue to benefit from sharp rises in incoming new business flows as they report ongoing improvement in client demand for their services. In turn, the buoyancy of activity and orders patterns continues to underpin strong demand for construction workers, with the pace of job creation remaining substantial in July, albeit not quite as exceptionally strong as June.”

He added that cctivity growth was broadly-based in July, with firms operating in civil engineering reporting a welcome return to expansion – perhaps linked to the recent marked step-up in the growth of Exchequer capital spending. “But as has been the case for much of the construction recovery to date, commercial and housing activity remain the main sources of the sector’s growth,” he said. “Commercial activity again increased sharply in July, while particularly encouraging was a notable quickening in the rate of expansion in housing activity where the PMI rose to an exceptional 63.9. Not only does this leave housing as the strongest-performing sub-sector, but it is one of the highest readings in the survey’s 18- year history.”

New order growth eases New orders continued to rise sharply amid reports of improving customer demand. New business has now increased in each of the past 61 months, although the rate of growth eased from June to a four-month low.

The need to keep up with improvements in demand encouraged construction firms to raise their employment and purchasing activity during July. Employment increased at a substantial pace, with job creation now having been recorded continuously for almost five years. Meanwhile, the rate of growth in purchasing activity eased for the second month running but was still strong.

July saw an improvement in confidence among construction firms, with optimism regarding the 12- month outlook for activity remaining strong.

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