The Irish construction sector recorded further strong growth of activity at
the end of 2013 as new orders rose sharply again. Purchasing activity and
employment increased as a result, while record optimism was registered. The
Ulster Bank Construction Purchasing
Managers’ Index (PMI) - - a
seasonally adjusted index designed to track changes in total construction
activity - - remained well above the 50.0 no-change mark in December, posting
58.3. Although this was lower than the reading of 58.8 in November, the index
still pointed to a substantial increase in construction activity in Ireland.
Confidence among clients had led to improved new order levels, thereby
supporting growth of activity.
It should be noted that the
number of firms polled has not been disclosed, which suggests that the sample
maybe very small. Markit, the London-based market data firm, usually discloses
the number of panel firms when publishing the results of PMI surveys.
Commenting on the survey, Simon Barry, chief economist Republic of Ireland at
Ulster Bank, noted that: "The Irish construction sector continued to enjoy
rising activity levels as 2013 drew to a close, according to the latest results
of the Ulster Bank Construction PMI. The headline PMI index edged lower in
December but remains at elevated levels and continues to signal strong expansion
in overall activity, as it has done for the past four months. Home-building
remains the strongest sub-sector, with the latest improvement in the Housing
index taking the rate of expansion to its fastest in almost nine years. Further
solid gains were also recorded in Commercial activity, though survey respondents
reported that activity on civil engineering projects continues to lag some way
"Rising activity and a further sharp increase in new business levels have
prompted firms to continue to expand their staffing levels: the survey showed a
fourth consecutive monthly gain in employment, though the pace of increase eased
slightly last month. Looking to the year ahead, Irish construction firms are
optimistic that the signs of improvement that took hold over the second half of
last year will be sustained through 2014. Indeed, sentiment around the 12-month
outlook reached a second consecutive record high for the survey as two-thirds of
firms indicated that they expect activity to be higher in a year’s time than in
December. Perceptions of improved conditions in the Irish economy generally
along with opportunities in overseas markets were the main drivers of the high
confidence levels, as Irish constructors clearly believe that their industry has
turned the corner following what has been a brutal downturn for the sector."
Housing activity rises at second-fastest pace in series history: The
overall rise in activity was again centred on the residential and commercial
sectors, with rates of expansion quickening across both sectors in December. On
the other hand, civil engineering activity continued to fall, and at a sharper
Strong increase in new orders: The Survey shows that new orders rose
substantially again in December, extending the current sequence of growth to six
months. The rate of expansion was only slightly weaker than that seen in
November, which was the strongest since October 2006. Panellists reported
improved tender availability and greater success in securing new projects.
Survey-record optimism: Latest data suggested that construction firms
expect growth of activity to continue during 2014. Sentiment was the highest in
the survey’s history, with improving economic conditions the main driver of
optimism. Constructors also predicted that more work overseas would support
growth of activity. Two-thirds of respondents forecast activity to be higher in
12 months’ time than current levels.
Constructors record further job creation: Rising workloads led
construction companies to increase their staffing levels for the fourth
successive month. That said, the rate of job creation was modest, having slowed
from the solid pace seen during November.
Purchasing activity rises sharply: Increased demand also contributed to a
further sharp rise in purchasing activity during December. Rising demand for
inputs imparted pressure on capacity at suppliers, and a lack of stock resulted
in a solid lengthening of delivery times which was the strongest since August.
A fourth consecutive monthly increase in input prices was recorded by
construction firms in December, although the rate of inflation eased for the
second month running and was broadly in line with the long-run series average.
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