December data signalled a positive end to 2015 in the Irish construction sector, with activity rising at a sharper pace in response to further steep growth of new orders. The rate of job creation also picked up during the month and business sentiment remained elevated as companies predicted further improvements during 2016. The Ulster Bank Construction Purchasing Managers’ Index PMI – a seasonally adjusted index designed to track changes in total construction activity – rose to 58.6 in December from 55.5 in November. Activity has now increased in each of the past 28 months, with the latest expansion the strongest since July.
Commenting on the survey, Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, noted that:
The Irish construction sector closed out 2015 on a firm footing according to the latest results of the Ulster Bank Construction PMI. The pace of activity growth picked up sharply last month as the headline PMI index rose to a five-month high of 58.6 in December, up from 55.5 in November. Overall activity trends were buoyed by a strong acceleration in both Commercial and Housing activity, with the pickup in the residential arena a particularly welcome development given concerns about the housing supply shortfall. Growth in Civil Engineering continues to lag some way behind the other sectors though it did record a fourth consecutive month of expansion last month.
Overall, the December survey results indicate that Irish construction firms are reporting solid momentum as a second full year of recovery drew to a close. The New Orders index continues to show vibrant expansion, with increasing enquiries for new business pointing to a healthy near-term pipeline of activity. And firms certainly remain optimistic about prospects for the year ahead, with sentiment remaining close to record levels despite easing slightly from November.
Faster rises in housing and commercial activity
Each of the three monitored sectors posted higher activity in December. Faster expansions in activity were recorded on both housing and commercial projects. Civil engineering activity continued to increase at a much slower pace than the other sectors covered by the survey, and the rate of growth eased to a three-month low.
Growth of new business remains sharp
According to respondents, higher workloads was the key factor leading to growth of activity during the month. New business increased sharply again, with panellists linking the latest expansion to higher enquiry numbers. New orders have now risen on a monthly basis throughout the past two-and-a-half years.
Fastest rise in employment since June
Higher employment was also linked by panellists to new order growth. The rate of job creation quickened for the second month running and was the fastest since June.
Constructors raised their purchasing activity for the twenty-second successive month in December, and at a solid pace that was only slightly slower than seen in November. Panellists linked increased purchasing to higher activity requirements.
Suppliers’ delivery times lengthened only fractionally in December, with the latest deterioration the weakest in the current sequence of lengthening lead times which now stretches to four-and-a-half years. Some respondents indicated that supplier performance had improved as a result of increased stock holdings.
The rate of cost inflation remained sharp, and was little-changed from November. A number of respondents reported that suppliers had raised their prices during the month.
Optimism around the future prospects for output growth continued in December, with sentiment at a near-record high despite easing from the previous month. Higher enquiry numbers and expectations that new order growth would continue during 2016 were the main factors supporting optimism.