Irish construction growth regains momentum

Figures for April show signs of the Irish construction sector regaining growth momentum, with activity, new orders and employment all rising at sharper rates than in March.

Companies remained strongly optimistic that activity will increase over the coming year. Meanwhile, a further sharp increase in input prices was recorded in line with the weakness of the euro.

The Ulster Bank Construction Purchasing Managers’ Index (PMI) is a seasonally adjusted index designed to track changes in total construction activity, with a figure over 50.0 indicating growth. The index rose sharply to 57.2 in April from 52.9 in the previous month, signalling a substantial increase in activity and the strongest in 2015 so far. Activity has now expanded in each of the past 20 months, with improving client confidence and the securing of new business reportedly behind the latest rise.

Commenting on the survey, Simon Barry, chief economist Republic of Ireland at Ulster Bank, said: “Following disappointing readings in the first quarter, the April results of the Ulster Bank Construction PMI paint a picture of a sector experiencing renewed improvement in the early part of the second quarter. The headline PMI index rose sharply last month to stand at its highest level so far in 2015. The April reading of 57.2 was up noticeably from the 52.9 recorded in March and points to a marked acceleration in the pace of activity in April.

“Encouragingly, the improvement reported by survey respondents last month was broadly -based. That is, the pace of activity growth accelerated across each of the three major sub -sectors. Particular improvement was reported in the commercial and housing arenas where growth picked up rapidly, while civil engineering returned to slight expansion following two months in a row of contraction.”

For the first time in three months, each of the three monitored construction categories recorded increases in activity as civil engineering returned to growth in April. That said, the expansion in civil engineering activity was only slight. Meanwhile, sharp and accelerated growth of activity was recorded on commercial and residential projects.

The rate of expansion in new orders also accelerated sharply in April, quickening for the second month running to the fastest since December.

As new orders increased, Irish construction firms boosted their staffing levels in April. The rate of job creation was substantial, and quickened to the fastest since January. Companies have raised employment continuously since September 2013.

Increasing new orders also contributed to a fourteenth successive monthly rise in purchasing activity, with the rate of expansion the fastest in 2015 so far. Meanwhile, suppliers’ delivery times continued to lengthen.

April data pointed to a solid expansion of subcontractor usage. This contributed to a further reduction in the availability of subcontractors, in turn allowing them to raise their charges sharply despite a further modest deterioration in the quality of their work.

The recent weakness of the euro against both sterling and the US dollar led to rises in the cost of imported items in April. As a result, input prices increased, with the rate of inflation remaining sharp despite easing from that recorded in March.