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Pace of home building accelerates as sentiment and new orders rise

 

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‘Solid’: Ulster Bank chief economist Simon Barry. Photo: Paul Sherwood

‘Solid’: Ulster Bank chief economist Simon Barry. Photo: Paul Sherwood

‘Solid’: Ulster Bank chief economist Simon Barry. Photo: Paul Sherwood

The pace of home building accelerated in July as new orders rebounded for the first time since the start of the Covid-19 crisis.

Ulster Bank chief economist Simon Barry said the expansion of activity last month in residential construction was "very solid" and reflected a faster-than-expected recovery in construction following the reopening of most sites in mid-May.

The monthly construction purchasing managers' index (PMI) by analysts IHS Markit for Ulster Bank found that, while work on residential sites was surging ahead, building activity on commercial sites and on civil engineering ­projects was lagging behind.

The headline PMI index - combining activity in all three sectors - measured construction levels at 53.2, up from 51.9 in June. Any reading above 50 indicates higher activity than the month before.

But virtually all of that growth came from residential construction, which reached 57.8 in July - an 11-month high - from 55.8 in June. By contrast, residential activity had fallen to a record low of 4.9 in April and 21.4 in May.

Analysts who had sharply cut their housing output forecasts when building sites closed at the end of March have begun to revise them upwards again.

Goodbody says it now expects 16,500 housing units to be finished this year and 19,500 next year, up 2,500 and 3,500 units respectively from its initial Covid-19 crisis forecast. It found that residential construction had slowed the least outside Dublin, particularly for single-unit housing, while social-distancing requirements were slowing the delivery of more complex apartment developments concentrated in and around the capital.

Today's published construction PMI found that new orders reversed course following four months of falls to reach 53.8 in July, up from 46.

However, builders continued to lay off workers in the sector - though at the slowest rate of the Covid-19 crisis. The employment index rose to 47.5 from 43.3. Ulster Bank said a minority of construction firms last month "took on extra staff in response to higher new orders".

For the second straight month, most managers surveyed said they expected construction activity to keep growing, "with confidence about the coming year rising slightly" in July to reach a five-month high, Mr Barry said.

Irish Independent