Construction activity increases at fastest pace since June

Irish construction activity rose at a faster pace during December as new orders showed strong growth, the latest industry snapshot shows.

The Ulster Bank construction purchasing managers’ index (PMI) found improving economic conditions supported a higher level of new orders last month, while the 12-month outlook also brightened. The rate at which activity increased was the sharpest since June.

The seasonally adjusted index rose to a “very elevated” reading of 58 in December, up from 56.7 the previous month and stretching far above the 50 level that signals an expansion in construction activity.

Inflationary pressures remained elevated, however, with input costs rising to the greatest extent in six months, as respondents reported higher prices for materials such as insulation and steel, as well as fuel, insurance and staff.

Housing was again the strongest performing sector, with Ulster Bank’s chief economist in the Republic of Ireland, Simon Barry, describing it as “an encouraging sign”.

Commercial activity also increased at a rapid rate, while there was “a welcome return to growth” for the civil engineering category after six months of decline.

Solid growth

Respondents to the survey reported “solid” growth in employment, although the pace of hiring eased to its slowest rate 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,” Mr Barry said.

The rate of purchasing activity “remained sharp” in December, but was slightly slower than in November.

The construction PMI, when combined with PMIs for the services and manufacturing sectors, as well as data on retail sales, housing supply and household income, pointed to an Irish economy that was “carrying considerable momentum”, Mr Barry added.

These improving conditions, in both the construction sector and the wider economy, supported confidence among firms that activity will increase further over the coming year.