Growth in construction has slowed for a third month

The pace of growth across the construction industry has slowed for a third month but builders are still hiring staff at a substantial pace, according to a monthly tracking of construction firms, writes Eamon Quinn.

The Ulster Bank index, which asks purchasing managers what is going on in the three parts of their industry, showed that growth slowed to its lowest level for 29 months.

At 55.1, the reading in August was down from July’s 56.6, and although still above the 50 level that indicates expansion, “bears watching in the months ahead”, the bank’s chief economist in the Republic, Simon Barry, said.

Commercial projects grew at a slower pace, at 56.1, while civil engineering, continued to contract.

“While the overall story remains one of continuing construction sector expansion, the latest PMI (purchasing managers’ index) readings suggest that momentum behind the recovery has slipped a little — a trend that bears watching in the months ahead,” Mr Barry said.

Housing activity posted the same growth reading as in July, growing the fastest of the three parts of the industry. The continuing expansion of the housing activity will be welcomed by government ministers, as they struggle to get a grip on the housing and homelessness crisis.

However, there is a growing consensus among analysts that the number of homes being built this year and, probably in the next few years, will fall far short of meeting pent-up demand.

Analysts also believe that there are more people who will be looking for accommodation in the country and that official figures are overstating the number of completed homes.

Davy last week said up to 50,000 homes may be needed to be completed each year to 2021. The Ulster Bank survey showed that building firms continued to hire more people in August.

“Confidence in the wider Irish economy and construction sector itself were factors leading companies to predict an increase in activity over the next 12 months,” says the survey. Optimism also rose, with two-thirds of construction firms saying Brexit wouldn’t affect their operations in the coming year.

This story first appeared in the Irish Examiner.

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