New order growth eases but remains “sharp
Activity and new orders continued to rise sharply in the Irish construction sector during May, despite further signs of a slowdown in growth. Meanwhile, the rate of job creation ticked up slightly over the month. Cost inflation gathered further momentum amid reports of higher costs for fuel and raw materials.
The Ulster Bank Construction Purchasing Managers’ Index® (PMI®) – a seasonally adjusted index designed to track changes in total construction activity – posted 55.9 in May, down slightly from 56.4 in April but still signaling a marked monthly increase in total construction activity.
Activity has now risen in each of the past 33 months, although the rate of expansion eased to the slowest since November last year. Panelists mentioned higher new orders and work on housing projects as having supported growth of activity.
Commenting on the survey, Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, noted: “The latest Ulster Bank Construction PMI signalled ongoing growth of construction activity in Ireland during May, with the headline index remaining well above the 50.0 no-change mark at 55.9.
“Although the rate of expansion eased slightly, it was still marked and above the pre-downturn average.
“A slowdown from the record rate of expansion seen in February was probably inevitable, but it would be reassuring to see some stabilisation in the growth rate in coming months.
“Looking beyond the headline figure, weaker expansions were also seen with regards to housing activity and new orders, while business confidence dipped.
“On the other hand, there were positive signs from a faster rise in commercial activity, while construction firms were in a position to up their rate of job creation slightly.
“To sum up, the overall picture is one of solid improvements, albeit with less spectacular rates of growth than were seen in the first quarter of the year.”
Housing activity continued to rise sharply in May, albeit at a slightly slower pace than in the previous month. The fastest increase of the three monitored categories was on commercial projects, where the rate of expansion accelerated.