Construction recovery gathers pace

The recovery of the construction industry gathered pace last month as growth in residential housing projects hit a 15-year high and employment rose for the eleventh straight month.

Overall activity in the sector also rose sharply in July and quickened to its fastest pace in three months while new business orders growth was the fastest in a decade, according to new figures contained in Ulster Bank’s Construction Purchasing Managers’ Index (PMI).

The pace of growth in the number of new homes being built was the quickest ever recorded in the 15-year history of the survey while the overall index rose from 59.9 to 62.6 in the month.

Commenting on the results, Ulster Bank Ireland chief economist, Simon Barry the results indicated a strong start to the second half of the year by firms in the sector.

“The Irish construction sector has made a strong start to the third quarter, according to the results of the latest Ulster Bank Construction PMI survey.

“Overall activity increased sharply in July, with the rate of growth quickening to its fastest in three months.

“The July results marked the 11th consecutive month of expansion among Irish construction firms — an important indication that a sustained recovery is taking hold,” said Mr Barry.

He noted however that despite the sharp rise in housing activity, overall levels remain low following the downturn experienced in the last number of years.

“It is important to recognise that levels of residential activity remain extremely low following the huge correction which took place over 2007-2013.

“Nonetheless, the evidence provided by the PMI and indeed other data sources, including the Department of Environment figures on housing completions, indicated that housing activity trends are clearly on an improving trajectory,” he said.

The rate of growth in new orders, which was largely attributed to an improvement in economic conditions by respondents to the survey, accelerated sharply during July and was the strongest since November 2004.

Consequently, the number of people at work in the construction industry rose again in July.

Civil engineering activity continued to decline, however, albeit at the slowest rate in the current sequence of decline.

Despite input prices rising at the fastest rate since March 2012 and suppliers’ delivery times lengthening again, construction firms remain optimistic for the remainder of the year with particularly strong growth expected in the housing and commercial sectors.