Ulster Bank PMI Barometer of Construction Activity Rises for 40th Month

The Irish construction sector ended 2016 on a positive note, with activity continuing to rise sharply amid a faster expansion of new orders. Rates of job creation and growth of purchasing activity remained substantial and firms were strongly optimistic that activity would increase further in 2017. That said, the rate of input cost inflation accelerated sharply to the strongest since March 2007. The Ulster Bank Construction Purchasing Managers’ Index® (PMI® ) – a seasonally adjusted index designed to track changes in total construction activity – posted 58.9 in December, down slightly from the reading of 59.8 in November but still signalling a substantial monthly increase in activity. Construction activity has now risen in each of the past 40 months, with panellists mainly linking the latest expansion to higher new work volumes.

Reduction in civil engineering activity

Both the housing and commercial construction categories continued to record sharp increases in activity, with the rate of growth marginally quicker in the latter. In contrast, civil engineering activity decreased for the second month running and at the fastest pace since April 2014

New order growth picks up

New orders have risen continuously throughout the past three-and-a-half years, with December seeing a strong monthly expansion that was faster than recorded in November

Further sharp rises in employment and purchasing

Rising workloads led construction firms to increase their staffing levels again at the end of the year. Moreover, the rate of job creation remained substantial and was broadly in line with the nine-month high seen in November. Likewise, firms increased their purchasing activity sharply, extending the current sequence of growth to 34 months. The rate of input cost inflation accelerated sharply during December and was the fastest since March 2007. Panellists reported higher prices for raw materials and manufactured goods. A further deterioration in the performance of suppliers to the construction sector was recorded, with the latest lengthening of lead times the greatest in ten months.

Business sentiment improved at the end of the year and was strongly positive. According to respondents, improvements in the construction sector and wider Irish economy are set to help lead to growth of activity over the coming year.