Construction input costs rose 'at a considerable pace' last month

Simon Barry, chief economist, Ulster Bank Republic of Ireland. 

Many construction firms say inflationary costs rose again "at a considerable pace" last month, as higher material costs, freight charges, Brexit, as well as the carbon taxes pushed input prices higher.

That is according to the latest Ulster Bank Construction Purchasing Managers' Survey which shows that 68% of firms reported higher input costs in November, as output expanded across housing, commercial, and civil engineering.  

The overall reading on the index of 56.3 in November was little changed from the previous month but was "still indicative of a sharp monthly increase in total activity" where any reading above 50 reflects an expansion in the building industry. 

All three parts of the construction industry posted gains from the previous month.       

"However, the November results again make clear that the sector continues to face highly testing supply-chain challenges linked to a variety of factors which continue to result in delivery delays and marked input cost pressures, including the pandemic, Brexit, higher global and domestic prices for energy and other materials and rising freight charges," Ulster Bank Republic of Ireland chief economist Simon Barry said. 

However, there was "just a hint" that supply chain disruptions and inflation costs were past their worst, he said.       

Housing activity was only slightly higher since October, which may raise concerns that the housing crisis and shortages of homes won't get better very quickly. 

The pace of growth in commercial buildings output - which includes offices and industrial buildings - slowed considerably in the month, while civil engineering returned to growth in the month. 

"Where activity expanded, respondents generally attributed this to improving demand," the survey found. 

Mr Barry said recent national accounts showed construction was growing rapidly and firms were recruiting more staff. 

“The overall sector’s ongoing recovery momentum was again evident in very healthy readings in employment and new orders, both of which recorded accelerating growth in November which resulted in a three-month high in each case," he said.