Pandemic continues to affect building sector, survey shows
Housing construction surged back into expansion mode last month – the first time since July that it’s been growing.
It is also the fastest rate of expansion since May 2019.
But the latest Ulster Bank Construction Purchasing Managers’ Index (PMI), published this morning, shows that the pandemic is continuing to hit the overall construction industry, resulting in higher input prices, disruption to supply chains and shortages, all of which saw the sector contract again last month.
The latest PMI notched up a reading of 48.6 in October. Any figure below 50 signals contraction.
But the reading last month was better than the 47 that was recorded in September.
The housing segment recorded a reading of 50.3 in October, way above the 44.1 reading seen in September and putting it back into expansion mode.
However, it will still be cold comfort to home hunters. The pandemic has severely curtailed output, with just 18,000 residential units expected to be completed this year. That’s way below the as-many-as 50,000 units that it’s been predicted are needed every year in the country to meet demand.
The October figure also came just as Ireland entered its latest lockdown. While the construction sector remains open during the lockdown, the six-week restriction period is almost certain to impact the sector at some levels.
Activity in both the commercial construction sector and civil engineering declined during October.
“While the October results contained reports of improving demand among some firms, such reports were not widespread enough to avoid another sub-50 reading for the headline PMI, which continues to indicate that more firms are reporting declining rather than increasing activity levels,” noted Simon Barry, chief economist for the Republic of Ireland at Ulster Bank.
“The latest results also again highlight that Covid-19 continues to disrupt construction supply chains, with supplier delivery times lengthening further last month amid reports of shortages of, and higher prices for, raw materials,” he added.
Timber was in shortest supply. There is a huge backlog here for granting tree-felling licences, which has caused the supply shortage. It has forced some sawmills to import significant amounts of lumber in an effort to meet demand.
Despite the lacklustre performance of the overall construction sector, Mr Barry said there are signs that the industry is strengthening.
“Forward-looking elements of the results are pointing to possible improvement ahead,” he said.
“Firms posted an increase in new business for the first time in three months, with a modest improvement in orders reflecting a pick-up in client demand,” said Mr Barry.
“In turn, more new business as well as efforts to catch up on work delayed by the pandemic underpinned a further improvement in the employment index. Also, business confidence moved back into positive territory,” he added.
As well as increasing new orders, efforts to catch up on previously delayed projects also supported employment growth, according to respondents to Ulster Bank’s survey.