Construction sector sees biggest increase in activity since 2006

Monday 11 November 2013 18.18
Ulster Bank Construction Purchasing Managers index rose to 59.4 in October from 55.7 in September
Ulster Bank Construction Purchasing Managers index rose to 59.4 in October from 55.7 in September

The recovery in the Irish construction sector continued to speed up in October, with growth of both activity and new business accelerating from September.

The latest Ulster Bank Construction Purchasing Managers index - which tracks changes in total construction activity - rose to 59.4 in October from 55.7 the previous month.

The rate of growth was the fastest in almost eight years.

The index measures activity in the housing sector, commercial sector and civil engineering sector. Any figure over 50 signals growth in a sector, while a figure under 50 signals contraction.

Today's index shows that rates of growth in activity picked up across both the housing and commercial sectors, with activity at the highest level since January 2005 and February 2007 respectively.

However, civil engineering activity continued to fall, although Ulster Bank said the rate of contraction was "relatively modest" compared with earlier in the year.

New orders rose at at the fastest pace in seven years, due to improving economic conditions in Ireland. With workloads increasing again, building firms upped their purchasing activity for the second month in a row.

However, Ulster Bank noted that the rate of job creation failed to pick up much last month, despite a marked rise in new work. It said that employment levels rose only marginally for the second month in a row.

The index shows that input prices rose for the 14th time in the past 15 months, and the pace of increase was the strongest in almost a year. Companies said they were seeing higher prices for materials, including timber. 

Strong optimism regarding future activity was seen again in October, with companies hopes largely centred on signs of improving conditions in both the construction sector and the wider economy.

Commenting on the index, Ulster Bank's chief economist Simon Barry said that while the signs of improvement in the construction sector are very welcome indeed, they are best viewed in the context of the enormous slump in activity which dogged the sector for much of the past six years. 

"Nonetheless, together with the healthy readings of the manufacturing and services PMIs from the past few weeks, the construction PMI points to an encouraging start to the final quarter, and contributes to a sense that the recovery in the wider economy is gaining traction," he added.