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Inflation soars for key construction supplies as sector eyes recovery

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Simon Barry, Ulster Bank’s chief economist for the Republic of Ireland. Photo: Paul Sherwood

Simon Barry, Ulster Bank’s chief economist for the Republic of Ireland. Photo: Paul Sherwood

Simon Barry, Ulster Bank’s chief economist for the Republic of Ireland. Photo: Paul Sherwood

Construction input costs are rising at their fastest pace in 17 years, but have failed to dampen the outlook amongst developers for the remainder of the year.

The latest Ulster Bank Construction Purchasing Managers’ Index published this morning shows the reading jumped to 49.3 in April compared to 30.9 in March as residential construction sites opened up again and new orders increased.

Any figure below 50 signals contraction and any figure above 50, expansion.

Housing construction activity showed a sharp improvement in April, with the index for the sector rising to 54.8 from 33.8 in March. April’s reading was the highest for the housing index so far this year.

Commercial activity rose to 42.2 from 31.3 in March, while civil engineering hit 43.1 compared to 23.8 previously.

“Housing was the only sub-sector to experience a return to growth last month,” noted Ulster Bank’s chief economist for the Republic of Ireland, Simon Barry.

“Looking ahead, this month’s keenly-awaited reopening of the wider sector, underpinned by a sizeable expansion in overall new business flows in April, should promote a broader strengthening of the overall sector’s activity trends beyond housing.”

He said that almost 60pc of respondents expect construction activity to rise in the coming 12 months, helped by the lifting of Covid restrictions and pent-up demand.

“While the improving outlook is certainly very welcome, one note of caution came in the form of a further acceleration in the rate of input cost inflation,” he said.

“This now stands at a near 17-year high, in part reflecting adverse supply chain impacts from Brexit, the pandemic and the recent blockage of the Suez Canal.”

The latest increase in input prices was the fastest since July 2004, and among the strongest in the Ulster Bank survey’s history. Higher shipping costs and rises in prices for items such as steel and timber were reported by respondents.

There is a global issue with supplies of core building supplies. PVC and chemical costs are also increasing.

Looser restrictions and higher new orders led construction firms here to take on extra staff last month, with job creation recorded for the first time in the year-to-date, according to the latest survey. Purchasing activity stabilised after sharp falls in the first quarter.


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