Construction set for first rise in output

The construction sector could register its first annual rise in output this year since 2006.

Overall building and construction activity slowed for the second consecutive quarter, between April and the end of June, but still showed enough of an increase to suggest the worst is over for the construction sector.

CSO data, published yesterday, shows that total construction output — covering residential, commercial and civil engineering projects — increased by 1.7% in the second quarter of the year. This followed on from rises of 4% and 6.1% in the preceding two quarters.

The last time no growth was evident was the third quarter of last year, when output fell by just under 1%. On a year-on-year basis, output rose by 11.2% in the second quarter, up from an annualised rise of 8.8% in the first quarter.

Only civil engineering work was down (-0.5%) on a quarter-by-quarater basis; with residential volumes up 1.2% and non- residential growing by nearly 15%.

While the CSO figures are difficult to gauge — on the housing front, they cover everything from new builds to repair, extension and maintenance work — commentators seem to agree that they are proof of some kind of recovery.

Construction accounted for 23% of GDP during the boom, 8%-9% was alluded to by the Government as a sustainable level, and that mightn’t be too far off, as the sector currently accounts for around 5% of annual GDP.

Davy Stockbrokers said the better-than-expected run of growth in building output points to the first annual increase in work output for seven years, while the likes of Savills and CBRE called the figures “significant”.

While expecting slightly stronger growth in the second quarter, Alan McQuaid, chief economist with Merrion Stockbrokers, said: “Both residential building and non-residential were up in the second quarter, and we would expect to see these components continuing to improve in the coming quarters and civil engineering should start to pick up as well, given an expected boost from the likes of the N7 and N11 motorway projects.”