Thursday 8 December 2016

Construction activity growth slows down

Published 09/05/2016 | 02:30

Simon Barry, chief economist with Ulster Bank
Simon Barry, chief economist with Ulster Bank

Growth of activity in Ireland's construction sector slowed for the second month in a row in April, to its weakest reading since November.

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Although the sector continued to remain comfortably in expansion territory, new orders and employment both rose at a softer pace.

Slower rises in activity were seen across all three categories of construction - housing, commercial and in civil engineering, according to the Purchasing Managers' Index for the sector, produced by Ulster Bank.

It comes just days after a report showed growth in the manufacturing and services sector had slowed to ­multi-year lows, with political instability at home and the upcoming vote on a British withdrawal from the European Union blamed for the latter in particular.

Despite the construction growth slowdown, respondents to the survey were upbeat. The optimism level among those who took part was the second highest in the series' history.

Simon Barry, chief economist with Ulster Bank, therefore, moved to assuage any concerns. "These declines need to be seen in the context of the exceptional strength recorded earlier in the year which saw the main PMI as well as the Housing sub-index establish new record highs in February," he said.

"So while this slippage in momentum bears careful monitoring in the months ahead, it is important to note that these results are still very much consistent with a sector comfortably in expansion territory.

"Indeed, construction firms remain distinctly upbeat about the sector's prospects. Sentiment in April rose to its second-highest level in the survey's history as more than two-thirds of respondents anticipate further gains in activity in the coming 12 months."

Slower rises in activity were recorded across the three categories of construction covered by the survey.

Housing activity continued to increase at the sharpest pace, closely followed by work on commercial projects.

Civil engineering remained the worst-performing category in April as activity rose only modestly and at the slowest pace in the year so far.

The PMI for the sector posted a reading of 56.4 in April, down from 62.3 in March. Above 50 signals expansion.

New orders increased for the 34th month in a row but, in line with the trend in activity, the rate of expansion eased.

A slower rise in employment was also registered, but the rate of job creation still remained strong.

Business sentiment improved in April, with more than two-thirds of respondents predicting a rise in activity over the coming year. Moreover, optimism was the second-highest in the series history, behind November 2014's record.

Forecasts of improving economic conditions and higher new business supported positive sentiment, while some panellists suggested that an expectation of improved housing supply would help lead to growth of activity.

In February, construction activity increased at its fastest pace since June 2000.

Separate research from recruiter Hays Ireland that month showed demand for construction and property jobs rose 46pc compared with the same month last year.

Irish Independent

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