Growth returns to the construction sector after 6 years

Construction activity grew last month for the first time in more than six years, according to figures due to be published today.

The Ulster Bank Construction Purchasing Managers’ Index (PMI), which tracks the sector’s performance on a monthly basis, shows the industry returned to growth last month on the back of an “accelerated” increase in new orders.

The overall index reading for September was 55.7, compared with 49.7 in August. Any return above 50 indicates an increase in activity while any number below that benchmark signals a decrease.

Last month was the first time that the index delivered a reading above the critical 50 benchmark since May 2007, the starting point of what turned into a deep recession for the industry.

The report states that new business increased “at a sharp and accelerated pace”, which led to a growth in purchasing activity and a stabilisation in employment.

The news comes ahead of tomorrow’s budget, which many expect to include some support for construction, possibly in the form of pledges to increase spending on public building projects next year.

Since the recession began in 2007 the value of the industry’s output has tumbled by €30 billion a year to €8 billion, while employment has fallen from more than 350,000 to about 100,000.

The Construction Industry Federation recently said there were signs of a recovery in the sector, with job numbers growing by 6,400 to 102,700 in the first six months of the year.

According to Simon Barry, Ulster Bank’s chief economist, the PMI figures are further evidence of improved trends in the industry.

“Significantly, overall activity rose for the first time in over six years, as the headline PMI jumped by six points to get back above the 50 breakeven level for the first time since May 2007,” he noted. The PMI shows that housing recorded the strongest growth, at 59.5, up from 53.8 in August, while commercial activity hit 56.1 in September, compared with 51 the previous month.

However, civil engineering, which includes big-ticket State-funded projects such as road building, continued to decline, dropping to 47.3. The number indicates that the fall was not as sharp as in August, when it declined to 41.

While employment steadied, at just above the 50 mark, the report said cost considerations still weighed heavily on the companies surveyed when it came to plans to hire more staff. Source: The Irish Times.