Ulster Bank Construction PMI Report 12/02/2018

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Activity rises at fastest pace in eight months during January

 

The Irish construction sector made a strong start to 2018, posting faster increases in activity, new orders and employment, as well as seeing confidence improve again. Meanwhile, input costs rose to the greatest extent in 11 years. The Ulster Bank Construction Purchasing Managers’ Index® (PMI®) – a seasonally adjusted index designed to track changes in total construction activity – rose to 61.4 in January from 58.0 in December. The latest reading signalled a substantial monthly increase in total activity, and the fastest since May 2017. Activity has risen continuously since September 2013, with panellists mainly linking the latest expansion to the securing of new contracts.

Commenting on the survey, Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, noted that:

“The latest results of the Ulster Bank Construction PMI survey paint a very encouraging picture of early-year activity trends in Irish construction. The headline PMI picked up for the third month in a row, with a highly elevated reading of 61.4 representing an eight-month high. There was a particularly notable acceleration in Commercial activity making it the fastest growing sector last month. However, the improvement was broadly-based, with the Housing PMI also rising to an eight-month high, consistent with ongoing very rapid activity growth. In addition, there were further welcome signs of improvement in Civil Engineering which logged a second consecutive month of expansion, with a 55.6 reading marking the best performance for that sub-sector in almost two years.

“Other detail within the report confirms the positive signals from the headline indicator. Notably, the New Orders index picked up again leaving it in line with the robust average pace of increase recorded to date in the recovery. And the strength of trends in current and prospective activity continues to underpin solid labour demand, with the Employment index rising to a five-month high. Overall, the January PMI indicates that, like their services and manufacturing counterparts, Irish construction firms have made a strong start to 2018. Moreover, construction firms are looking to the year ahead with high levels of confidence, with sentiment around future prospects buoyed by expected further improvements in the wider economy and in the construction industry itself.”

Commercial sector leads growth in January

For the second month running, activity rose across all three monitored categories of construction as civil engineering continued its recent recovery. In fact, activity on civil engineering projects increased sharply in January. Steep expansions in activity were recorded again in the housing and commercial subsectors, with commercial posting the strongest growth at the start of 2018.

 

New order growth at six-month high

Confidence among clients regarding economic conditions resulted in further growth of new orders in January. Moreover, the rate of expansion quickened to a six-month high.

Further sharp rise in employment

Rising workloads led construction firms to increase their staffing levels again, the fifty-third consecutive month in which that has been the case. The rate of job creation was sharp and the fastest since last August. In line with the trends in activity, new orders and employment, the rate of expansion in input buying accelerated at the start of the year.

The increase in demand for inputs imparted pressure on suppliers. This, combined with a shortage of materials caused a further lengthening of delivery times. The latest deterioration in vendor performance was the sharpest in five months.

January data pointed to a sharp and accelerated monthly increase in input costs, with the latest increase the fastest since January 2007. A number of panellists mentioned that suppliers had raised their prices, while higher costs for fuel and labour were also reported.

Business sentiment strengthened for the second consecutive month. Confidence reflected expected improvements in conditions both in the wider economy and construction industry itself, as well as the prospect of further increases in new contracts. More than 53% of panellists forecast a rise in activity over the coming year.


The Ulster Bank Construction PMI is issued exclusively for the general information of clients, contacts and staff of Ulster Bank. The contents are not a substitute for specific advice and should not be relied upon as such. Accordingly, whilst every care has been taken in the preparation of this publication, no representation or warranty is made or given in respect of its contents and no responsibility is accepted for the consequences of any reliance placed on it by any person.

The intellectual property rights to the Ulster Bank Construction PMI® provided herein are owned by or licensed to IHS Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without IHS Markit’s prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon.

In no event shall IHS Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index® and PMI® are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. IHS Markit is a registered trade mark of IHS Markit Limited.

Ulster Bank Ireland DAC. Ulster Bank Ireland DAC. A private company limited by shares, trading as Ulster Bank, Ulster Bank Group, Banc Uladh and Lombard. Registered in Republic of Ireland. Registered No.25766. Registered Office: Ulster Bank Group Centre, George’s Quay, Dublin 2, D02 VR98. Member of the Royal Bank of Scotland Group. Ulster Bank Ireland DAC is regulated by the Central Bank of Ireland. Calls may be recorded.

 

 

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