Construction activity gathers speed

Ulster Bank PMI

The rate of activity growth in the Irish construction sector gathered speed again in May, returning to the pace seen in the final quarter of 2014, says Ulster Bank Chief Economist Simon Barry.

Rising activity was supported by strong growth of new orders with firms increasing their employment and purchasing activity accordingly. There was a further sharp rise in input prices as panellists highlighted the impact of the weak euro.

The Ulster Bank Construction Purchasing Managers’ Index, a seasonally adjusted index designed to track changes in total construction activity – increased for the third month running in May, posting 63.3 from 57.2 in April.

The reading signalled the sharpest increase in activity since November last year, with the current sequence of monthly expansion now extended to 21 months.

Commenting on the survey, Simon Barry noted that:

“The latest Ulster Bank Construction PMI report reveals a further improvement in business activity in May. Following a noticeable pick-up in April, activity rose sharply once again last month with the headline PMI index accelerating from 57.2 to 63.3 – its highest level since November of last year.

“This extends the construction sector’s run of continuous expansion to 21 months. The detail behind the headline paints a similarly optimistic picture. For the second successive month a marked acceleration in activity was recorded in two out of the three major sub-sectors, namely Housing and Commercial, while Civil Engineering activity also edged higher, albeit a much less rapid pace.”

“Respondents also reported a further pick-up in new orders, which rose to 60.4 – its highest level so far in 2015. This resulted in firms adding to staffing levels in response to greater client demand with one in our panellists increasing their headcount last month. Moreover, sentiment about the sector’s prospects over the coming twelve months also rose in May and remains at very elevated levels. Irish construction firms continue to envisage further activity gains on the back of a strengthening in the broader economy.”

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