Activity in the construction sector returned to expansion for the first time in four months in June, according to Ulster Bank.

The bank produces a monthly index designed to track changes in construction activity, which is gauged on a scale of 1 to 100, with 50 the break-even point.

The index had been below 50 since March, signalling contraction in the industry. It went as low as 4.5 in April.

The measure of 51.9 posted in June was up substantially on the 19.9 recorded in May, when construction sites around the country slowly returned to activity.

"The latest survey results signalled a welcome return to expansion in Irish construction activity in June," Simon Barry, chief economist with Ulster Bank, said.

"Notably, the headline PMI index rose sharply last month to get back to above the 50 break-even level for the first time since the coronavirus hit the Irish economy," the economist said.

All three sub-sectors of the index - housing, commercial and civil engineering projects - recorded sharp growth in June, with housing performing particularly well. 

The housing index score rose from 21.4 in May to a ten-month high of 55.8 in June, signalling a fast expansion in activity following the extreme weakness reported in recent months.

New orders and employment both improved markedly, but remained in contraction territory with readings of 46 and 43.3 respectively.

Simon Barry said the employment situation was still quite challenged with some sequential improvement evident.

The Tánaiste, Leo Varadkar, recently questioned the high numbers of construction workers who were still availing of the Pandemic Unemployment Payment, despite the fact that the majority of sites were back in operation since May.

"The employment situation is not as bad as it was at the peak point of weakness," Mr Barry said. 

"There has been an easing in the rate of deterioration. If you look at the numbers on the PUP, the peak point for numbers was around early May. What we've seen since is a gradual, steady but still unspectacular decline. The decline has been running at around 4,000 to 5,000 a week on average over the last few months."

Survey participants also reported a further increase in costs in the month of June.

"After a fall in April, there was a bit of a pickup in the last two months," Mr Barry said.

"We're also seeing impact on the supply chains. Some are also reporting reduced capacity at some suppliers, shortage of inputs and delays from some UK suppliers. It all contributes to a sense that there are virus related challenges at the moment."

Firms also posted a positive outlook for the year ahead for the first time in four months. 

39% of respondents said they anticipated higher output levels, a notable improvement on March when activity expansion was anticipated by fewer than 17% of firms.