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Irish construction sector remains positive

Published by , Assistant Editor
World Cement,

Activity in the Irish construction sector continued to rise sharply in January, following higher new orders. The rate of input cost inflation quickened to the sharpest since February 2007, with the Ulster Bank Construction Purchasing Manager’s index posting 55.7 in January, to signal a further marked monthly increase. Although down from 58.9 in December 2016, the index suggested a slower pace of expansion for the third month running.

Commenting on the survey, Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, noted that, “Irish construction activity continues to grow at a healthy pace according to the latest results of the Ulster Bank Construction PMI. The headline PMI index remained comfortably in expansion territory in January, albeit that the pace of growth eased for the third month running consistent with a modest loss of momentum early in 2017 after a robust end to last year. Very encouragingly, Residential activity remains a particular bright spot with Housing activity continuing to rise at a rapid pace, while Commercial activity also very much remains in expansion mode, though the pace of growth has eased in recent months. Civil Engineering continues to lag behind the other sectors, with respondents reporting a third consecutive monthly decline in activity. “Respondents continue to judge the Irish construction outlook to be very favourable. Confidence about future activity prospects remained strongly positive in January amid further solid gains in New Orders, despite some easing in the rate of increase. Indeed, buoyed by the ongoing increase in work volumes, last month saw a substantial and accelerated rise in staffing levels with the rate of job creation picking up to its second-fastest in the survey’s 16 ½ year history. One note of caution stems from further evidence of building cost pressures with the rate of input cost inflation picking up to its quickest in almost 10 years. Respondents reported higher prices for oil-related products and for items sourced from UK suppliers, the latter effect consistent with growing signs of Brexit-related price and costs increases in the UK economy.”

The rise in total activity continued to reflect growth in both the commercial and housing categories, while civil engineering activity continued to fall, extending the current sequence of decline to three months.

New orders also rose at a sharp, but reduced, pace in January, with new business being linked to improving client demand amid stronger confidence.

Rising workloads led to a further increase in employment at the start of the year, with the rate of job creation being the second-fastest in the survey’s history. Approximately 27% of respondents signalled a rise in staffing levels during the month.

Companies also increased their purchasing activity at the start of the year, reflecting higher new orders despite the growth rate easing from December to the slowest since last June.

Increasing demand for inputs contributed to another lengthening of suppliers’ delivery times, although the rate of deterioration in vendor performance was the weakest in four months.

Further mounting cost pressures in January came from the rate of input cost inflation quickening to the fastest since February 2007. According to respondents, higher prices for oil-related products and rising costs for items from UK suppliers had been behind the latest increase.

Construction firms remained strongly optimistic that activity would increase over the coming 12 months. This positive sentiment was linked to confidence in the wider Irish economy and predictions of future new order growth.

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