Building sector showing growth

September saw the first signs of growth in the construction sector for more than six years, with activity increasing for the first month since May 2007.

The latest edition of the monthly Ulster Bank Construction Purchasing Managers Index — which gauges the health of the sector — shows a reading of 55.7 points for September, up from 49.7 points in August.

The latest reading is the first time the index has been above the 50-point mark — which separates a sector in decline from one in growth mode — since May 2007.

Ulster Bank chief economist Simon Barry said: “Housing was again the strongest sub-sector, as activity expanded at its fastest pace since Dec 2005 following a third consecutive above-50 reading.

“Commercial activity also saw an acceleration in its rate of expansion last month, and while respondents continue to report falls in civil engineering activity, the pace of decline eased to its slowest in some six years.

“The September results show that the nascent recovery in activity levels is producing a stabilisation of employment among survey respondents.”

He added: “However, firms reported that cost considerations continue to weigh on their hiring plans — an indication that respondents remain understandably cautious following what has been a brutal downturn for the sector. Nevertheless, forward-looking elements of the survey offer encouragement about future prospects.”

The latest PMI also shows that contract wins for firms in both domestic and overseas markets led to a substantial rise in new orders last month.

New business levels increased for the third month in a row, and at the fastest pace since Nov 2006.

Meanwhile, the latest edition of the National Housing Construction Index, from building database Link2Plans, shows tentative signs of recovery in the market.

Although on a nationwide basis planning applications were down 6% in the first eight months of the year, with project commencements down by 10%, six counties (Dublin, Kildare, Carlow, Donegal, Monaghan, and Kerry) showed increases in applications; with five (Dublin, Roscommon, Longford, Meath and Wexford) showing year-on-year rises in commencements.

“There are clear signs of improvement, especially in Dublin where both applications and commencements are up,” Link2Plans chief Danny O’Shea said.

“It will be interesting to see if the good weather experienced over the past few weeks will see the next edition of the index register an increase.”