Construction tipped to maintain recovery

Overall growth in construction activity eased to its slowest pace in three months during December, but the sector is still expected to maintain its recent recovery throughout 2015.

The latest edition of Ulster Bank’s construction PMI (purchasing managers’ index) — and the last one for 2014 — shows a reading of 63.1 points for December.

This was down, marginally, on November’s 63.5 point reading. Anything above 50 points indicates a sector in growth mode.

While December kept the sector ticking along, the rate of growth was the slowest since September. However, the average reading for 2014, as a whole, was the highest since the survey — which is seen as the chief barometer of health for Ireland’s construction sector — began in 2000.

“The results [of the December survey] confirm that activity trends in Irish constuction remained robust as 2014 drew to a close,” said Simon Barry, Ulster Bank’s chief economist in the Republic.

He added: “Respondents continue to report a broad-based recovery across the sector. While the indices for housing and commercial activity declined in December, they both remained at very elevated levels, and civil engineering activity increased at its fastest pace in eight years.”

That said, new business orders for building firms continued to expand but growth fell to a four-month low.

“It still remains at very punchy levels and continues to indicate solid expansion in new business activity. New orders have now increased for 18 consecutive months and respondents expect this trend will likely continue, as sentiment remained very bullish in December, with approximately two-thirds of respondents forecasting higher activity in 12 months’ time,” Mr Barry said.

Also touching on another positive, the sustained growth in hiring seen last month, he added: “The sustained expansion in orders and activity, along with high levels of optimism in relation to future business activity, meant firms continued to report increased staffing levels last month. In fact, the employment index remained above the no change 50 level for the 16th consecutive month in December.”

Overall, Ulster Bank sees the sector primed for further growth this year. Mr Barry said 2014 should be viewed as being an important year for Ireland’s construction sector, with results from the year’s 12 PMIs pointing to “the establishment of a solid, broad-based recovery”.

“While this recovery needs to be seen in the context of the huge downturn which hit the sector over 2006-2013, the encouraging trends in place at the end of the year indicate that the sector will likely enjoy further expansion in 2015.”

A breakdown of the latest survey’s findings shows that residential building activity continued to rise sharply during December, despite the pace of expansion slowing. The fastest rise of the three categories traditionally measured— housing, commerical and civil engineering — was on commercial activity. Meanwhile, the PMI also showed that civil engineering activity increased for the third straight month, and at the steepest pace since October 2006.

Building firms remain confident about prospects over the next year, with most upbeat about economic conditions improving further in 2015. December’s optimism reading was amongst the highest for 2014.


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