Construction is growing at its weakest pace for eight months, but confidence remains

Ulster Bank's latest construction industry index shows only marginal growth — but firms are still confident about the future

Construction and building activity growth slowed to the weakest pace for eight months in December, according to new data.

The latest monthly construction industry index, published by Ulster Bank, still indicates growth, albeit at a much slower rate than previously.  The index shows a reading of 53.7 for December. 

The significance of that is that anything above the neutral 50 point mark indicates an industry in growth mode. 

However, that reading is down from the 56.3 measure for November.

There were rises in housebuilding and civil engineering activity last month, but the most notable increase was in commercial development; but even that area saw its softest growth in eight months.

'Unsurprising' ease in growth

The overall easing in growth was an “unsurprising” development, according to Ulster Bank chief economist in the Republic Simon Barry, given the earlier slowdowns in the manufacturing and services industries and an easing in general economic growth momentum due to the pandemic.

The headline growth reading "still points to healthy growth in construction activity on a par with that experienced on average in 2019, while it also points to faster growth than signalled by the latest construction PMI [purchasing managers index] for the wider eurozone," Mr Barry said.

“While the late-year easing of momentum in construction growth bears close monitoring, particularly in the context of risks posed by still-very high case numbers, the December survey results nonetheless offered some encouraging signs regarding the sector’s prospects as we move through the early part of 2022," he said.

Positives include a continued decline in input costs and strong optimism amongst construction firms.

Firms are still confident 

Companies remained confident that activity will rise over the coming year, with sentiment ticking up from that seen in November. A strong pipeline of new work is set to support further improvements in new orders, while a number of firms signalled confidence in the housing sector, the latest survey said.

The increased optimism and bigger workloads also saw companies further expand their staffing levels last month, with employment in the sector now rising in nine straight months.