Tuesday 24 April 2018

Return of confidence boosts construction sector activity

Simon Barry Ulster Bank Senior Economist
Simon Barry Ulster Bank Senior Economist
Peter Flanagan

Peter Flanagan

ACTIVITY in the construction sector surged again last month, as confidence continues to return.

The latest construction purchasing managers index (PMI) from Ulster Bank came in at 58.8 in November. While that was slightly down on the 59.4 recorded in October, it was still well ahead of the 50 that marks the difference between growth and contraction.

The PMI measures the amount of activity in a particular sector into a single number. Over 50 means the sector is growing, under 50 means it is shrinking.

This is the third straight month that the construction sector has grown. The industry only returned to growth after six years of shrinking in September and since then it has grown steadily.

Importantly, confidence appears to be flooding into construction, albeit from a nearly non-existent base.

There was what Ulster Bank called a "marked pick-up in the rate of job creation" during the month, while business sentiment was the highest since the survey began in June 2000.

Anecdotal evidence suggested that rising new business amid improving market conditions had supported the latest increase in activity, Ulster Bank claimed.

Commenting on the survey, the bank's chief economist for the Republic, Simon Barry, (pictured) noted that: "The November results confirm that activity trends in the Irish construction sector continue to improve.

"The headline PMI index did fall slightly last month, but remains well above 50, signalling solid ongoing expansion in activity levels.

"In keeping with the pattern of the last several months, the improvements are being underpinned by recoveries in both the housing and commercial arenas, where activity has now increased in each of the past five and four months respectively," he added.

Looking ahead, Mr Barry said near-term prospects for the sector "appear favourable, judging by a further acceleration in the rate of growth of new business".

"The New Orders index reached its highest level in over seven years as firms reported higher demand both at home and abroad, in the process spurring a third consecutive monthly rise in employment," he added.

"Moreover, optimism levels of survey respondents reached their highest levels since the survey began in 2000. The recent improvements . . . need to be seen in the context of the huge declines of recent years," Mr Barry added.

Irish Independent

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