The recovery in the Irish
construction sector continued in May. Although rates of expansion in activity,
new orders and employment all eased from the highs seen in the previous month,
they remained strong and companies were again optimistic regarding growth over
the coming year. A marked acceleration in the rate of input cost inflation was
recorded as suppliers took advantage of improved demand for inputs to raise
their charges. The Ulster
Bank Construction Purchasing Managers’ Index
(PMI) – a
seasonally adjusted index designed to track changes in total construction
activity – posted 60.2 in May, down from the previous month’s reading of 63.5
but still pointing to a sharp increase in total construction activity. Activity
has now risen in each of the past nine months, with the latest expansion linked
to higher workloads and improving confidence.
No panel data is released or the
Simon Barry, Chief Economist Republic of
Ireland at Ulster Bank, noted that: "The latest Ulster Bank
Construction PMI signals ongoing strong monthly growth of activity, with May’s
headline reading only slightly below April’s near-record high. The recovery
continued to be centred on housing and commercial activity, with both areas
posting substantial rises again. However, there was some welcome news with
regards to civil engineering activity, which decreased at the slowest pace since
the end of 2007.
"The rate of growth in new orders also remained sharp despite
easing from the previous month. Companies reported success in securing contracts
for work both in Ireland and abroad and were confident that these trends would
continue over the coming year, leading to further growth of activity during the
next 12 months. This optimism encouraged firms to take on extra staff and raise
their purchasing activity, in both cases at marked rates.
"Another notable aspect of the latest data was a sharp
acceleration of cost inflation amid reports that suppliers have started to raise
their charges in response to strengthening demand for inputs. Overall, the May
data re-affirms the recent view of a sector on the mend."
expansion in commercial activity: The commercial sector was the
best-performing again in May, while a strong expansion in housing activity was
also recorded during the month. Although activity on civil engineering projects
continued to fall, the rate of decline slowed sharply to the weakest in the
current sequence of contraction which began in December 2007.