The recovery in the Irish construction sector picked up pace in October. Growth of both activity and new business accelerated from September and firms raised their input buying sharply, although the rate of job creation remained marginal. Meanwhile, cost inflation quickened as material prices increased.
The Ulster Bank Construction Purchasing Managers’ Index® (PMI®) – a seasonally adjusted index designed to track changes in total construction activity – rose to 59.4 in October from 55.7 in September to signal a sharp monthly expansion of activity. Moreover, the rate of growth was the fastest in close to eight years.
Rates of growth in activity picked up across the housing and commercial sectors, reaching the highest since January 2005 and February 2007 respectively.
On the other hand, civil engineering activity continued to fall, although the rate of contraction was relatively modest compared with earlier in the year. Where activity increased, panelists mainly linked this to improving economic conditions in Ireland. This also helped lead to a rise in new business as enquiry numbers increased and panelists reported greater success in securing contracts. The latest expansion in new orders was substantial, having accelerated for the third consecutive month to the fastest in seven years.
With workloads increasing again, construction firms raised their purchasing activity for the second month running. As with activity and new orders, the rate of growth in input buying quickened from that seen in September.
The rate of job creation failed to pick up notably during October, despite a marked rise in new work. Employment rose only marginally for the second successive month.
The usage of sub-contractors increased at a marked and accelerated pace during the month, contributing to the fastest decline in the availability of sub-contractors since December 2004. Meanwhile, the quality of sub-contractors’ work deteriorated and they lowered their rates charged following a modest increase in September. Input prices increased for the fourteenth time in the past 15 months. Moreover, the rate of inflation quickened sharply to the strongest in close to a year. Panelists highlighted rising costs for materials including timber.
Low stock levels at suppliers was the main reason for a deterioration in vendor performance, according to panelists. Delivery times lengthened for the twenty eighth consecutive month, but at the weakest pace since April 2012.
Strong optimism regarding future activity was recorded again in October, with sentiment broadly in line with that seen in September. Optimism was largely centred on signs of improving conditions in both the construction sector and the wider economy.
