Building sector growth slows down in August

The pace at which Irish construction firms hired new staff quickened to a six-month high in August as builders saw new business orders rise at their fastest pace since March.

The latest monthly construction purchasing managers’ index (PMI) from Ulster Bank — seen as the key barometer of health for the sector — shows that the industry continued to grow last month, albeit at a slower pace than in July.

A reading of 58.4 points was noted, down from 61 in July.

Anything above the neutral 50 point mark represents a sector in growth mode. Once again, commercial and housing activity drove growth, but civil engineering activity declined for the first time in eleven months.

“The latest results... indicate that there was a further solid rise in activity at Irish construction firms in August,” said Simon Barry, Ulster Bank’s chief economist for the Republic.

“The pace of growth eased modestly relative to July, but the August reading of the headline PMI index — at 58.4 — still remains very comfortably in expansion territory.

Indeed, August marked the 36th consecutive month of expansion, highlighting that a sustained uplift has been underway for three full years now at Irish construction firms,” he added.

The August PMI comes just days after latest CSO data showed that Irish construction output grew by 16.5% — in volume terms — on a year-on-year basis in the second quarter of this year.

However, that growth was only cautiously welcomed by analysts.

“These exceptional growth rates must be seen in the context of activity bouncing back off a low base. Housing completions are still averaging just 13,500 a year at present; well below demographic demand,” said David McNamara of Davy Stockbrokers.

The Ulster Bank survey also had a positive line regarding the recent Brexit vote.

“Almost 60% of respondents expect no impact from the referendum result on their activity over the coming year, while broadly similar proportions of companies expected activity to be boosted or reduced by the result. Indeed, firms remain strongly optimistic about prospects for construction activity over the coming 12 months,” Mr Barry said.