Construction growth to continue

THE runaway growth of the construction sector shows no signs of easing, the latest Ulster Bank forecast shows.

The Ulster Bank Construction Purchasing Managers’ Index (PMI) for February shows output has not risen for 30 consecutive months.

Ulster Bank chief economist Pat McArdle said activity in February did ease slightly but was in line with previous years.

Activity in the housing end of the sector eased a touch last month, as did activity in the civil engineering industry. However, activity in the commercial building market picked up, according to Ulster Bank.

Mr McArdle said: “After peaking in December, housing activity eased back in each of the past two months, just as it did in early 2005. Indeed, the Housing Index is little changed from a year ago, prima facie indicating broadly similar rates of expansion.

“The (Department of Environment) house completion figures, in contrast, jumped sharply in the latter part of 2005 and, while they fell back in January, they are still running at levels well in excess of a year ago.

“Further declines in the (department’s) monthly numbers will be needed to bring the PMI and the department’s figures back into agreement.”

He added: “Otherwise, there was little change with confidence high, cost inflation strong - interestingly, steel was one of the few items to fall in price - and employment continuing to expand at a steady rate, much as it did for most of last year.”

The report found growth of the construction sector was underpinned by a sharp rise in new orders in February. New work expanded at the most marked pace for 14 months as several firms reported the positive impact of recent marketing activity. New order volumes have risen each month since September 2003.

The rise in activity resulted in construction firms increasing their employee numbers for the 30th successive month in February. The rate of workforce expansion remained robust, despite easing for the second month in a row.

“Irish construction firms sharply increased their purchasing activity, to satisfy greater activity requirements. Firms had to wait longer for the delivery of purchases as lead-times worsened for the ninth successive month,” the report said.

Construction firms faced a sharpened rate of input cost inflation in February. Average input prices rose at the strongest pace for four months as firms indicated that the costs of fuel and a range of raw materials had increased.