According to data released by Ulster Bank, growth weakened in the Irish construction sector during January, with rates of expansion in activity and new orders slowing sharply from the end of 2014. However, strong growth in employment continued and optimism improved to a near-record high. On the price front, reports of lower fuel costs were outweighed by exchange rate movements, leaving input price inflation little-changed from December. The Ulster Bank Construction Purchasing Managers’ Index® (PMI®) dropped to 57.1 in January from 63.1 in December, signalling a sharp overall increase in total activity during the month, albeit the weakest for almost a year. Activity has now increased in each of the past 17 months. The month-on-month fall in the index was the largest in over seven years.
“The January reading of the Ulster Bank Construction PMI shows that construction activity continued to expand at a solid pace in the early part of the new year,” said Simon Barry, Chief Economist Republic of Ireland at Ulster Bank. “At 57.1, the headline PMI was again well above the expansion threshold of 50, marking the seventeenth consecutive month of activity gains. However, the index did fall back sharply last month (from 63.1 in December) consistent with a slowing in the pace of increase to its weakest in almost a year. Slower growth was evident across the Housing, Commercial and Civil Engineering sub-sectors as the January responses signalled a notable softening in growth momentum.
“While the loss of momentum in January is striking, the softening needs to be seen in the context of the exceptionally strong growth rates recorded through 2014 from which some pullback was always likely (e.g. the October 2014 reading of the PMI was the second highest on record). Indeed, other elements of the survey held up well last month. The pace of jobs growth eased only slightly and remained strong. Moreover, sentiment ticked up from December levels and was the second-highest in the series history behind the record reached last November, suggesting that firms retain a very positive view of the year-ahead outlook despite an apparent easing in the pace of activity in January.”
By far, the strongest monthly rise in activity was recorded on commercial projects. The rate of growth in commercial activity remained sharp, despite easing for the third month running. A marked slowdown in the rate of growth in housing activity was recorded, with the latest rise the weakest since August 2013. Civil engineering activity rose for the fourth month in a row during January, with the rate of growth broadly similar to that seen for housing activity.
The rate of growth in new orders also slowed sharply at the start of 2015, but remained solid. The rise was the weakest since August 2013. Where an increase in new orders was recorded, panellists mentioned improvements in the availability of work.
The extent of the slowdown of growth in activity and new orders was not matched by employment. The rate of job creation remained strong and was only slightly weaker than in December. Positive expectations regarding workloads in coming months helped to support rises in employment.
Adapted from press release by Rosalie Starling
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