Ireland begins 2014 with sharp rise in construction

Feb 11, 2014

The Irish construction sector maintained its recent run of improvement at the start of 2014 as further new business growth led to another strong rise in activity.

Firms increased their employment at a faster pace and bBusiness sentiment was only slightly weaker than December’s record high as firms forecast further growth of activity over the coming year.

The Ulster Bank Construction Purchasing Managers’ Index (PMI) - a seasonally adjusted index designed to track changes in total construction activity –  posted 56.4 in January, down from 58.3 in December but still signalling a sharp monthly increase in construction activity. Activity has now risen in each of the past five months. Where growth of activity was recorded, panellists reported that this was in line with further increases in new orders.

Simon Barry, chief economist Republic of Ireland at Ulster Bank said: “Early 2014 has seen a further expansion in Irish construction, according to the latest results of the Ulster Bank Construction PMI. The headline index did pull back a little from its end -2013 levels in January but the PMI remains comfortably in expansion territory, as it recorded its fifth consecutive above-50 reading. The more positive trends in the sector continue to be underpinned by solid increases in activity levels in the home-building and commercial arenas, though respondents reported further declines in civil engineering.

“The improvement in activity levels, in tandem with another strong gain in new orders, produced a fifth consecutive month of expanding employment, with the pace of hiring picking up in January to its second-fastest in nearly seven years. Moreover, optimism surrounding the prospects for the year ahead remains high among Irish construction firms. Sentiment levels have stayed close to the survey record seen in December as some two -thirds of firms anticipate further growth over the coming year reflecting a belief that the nascent construction recovery will gain traction in the months ahead.”

The rise in total activity again reflected strong growth in the residential and commercial sectors, although in each case the rate of expansion eased from the end of last year. Civil engineering activity continued to fall sharply, with the rate of contraction quickening to the fastest since June 2013.

As was the case with activity, new orders continued to rise at a substantial pace in January, albeit one that was slower than in December. Panellists reported improved customer demand, with competitive bidding helping them to secure new business.

With workloads continuing to rise sharply, construction firms increased their staffing levels. Moreover, the rate of job creation was solid, having quickened over the month. Latest data on business sentiment suggested that companies expect activity to continue to rise over the coming year. Sentiment was only marginally weaker than December’s record high as a number of respondents mentioned increased enquiries.

Rising activity requirements led companies to increase their input buying in January. Although solid, the rate of expansion was the slowest in the current five-month sequence of growth. Anecdotal evidence suggested that suppliers held insufficient stocks to respond to recent rises in demand for inputs. Consequently, vendor lead times lengthened again, and at the strongest pace since last August.

The rate of input cost inflation eased for the third month running at the start of 2014 and was below the series average. Where cost pressures did increase, this was mainly linked to higher raw material prices, with timber mentioned in particular.

Source: The Construction Index