Growth of new orders accelerates in February

Activity in the Irish construction sector rose again during February as new order growth picked up pace. Companies also upped their rate of job creation and maintained a strongly optimistic outlook for the year ahead.

Meanwhile, cost inflationary pressures were only modest, having eased for the fourth successive month.

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The Ulster Bank Construction Purchasing Managers’ Index® (PMI®) – a seasonally adjusted index designed to track changes in total construction activity – registered at 56.2 in February, broadly unchanged from the reading of 56.4 in January, and thereby signalling a further sharp rise in activity in the construction sector. Activity has now increased in each of the past six months.

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

“The February results of the Ulster Bank Construction PMI point to further rises in Irish construction activity mid-way through the first quarter of 2014. The headline PMI index was essentially unchanged in February and remains well above the expansion threshold of 50, consistent with ongoing solid gains in activity. Indeed, the Construction PMI has been above 50 for six months in a row now – an important sign that recovery in the sector is becoming increasingly well-established. The pick-up in activity is translating into a welcome rise in staffing levels, with the employment index also registering a sixth consecutive monthly expansion in February.

“Looking ahead, near-term prospects for the sector are supported by further growth in new orders as firms reported that better market conditions are generating stronger pipelines of new business. Beyond the near-term, firms remain strongly optimistic about the sector’s 12-month ahead outlook as sentiment last month remained close to the record high seen in December, buoyed by more positive signs in the wider economy.”

Housing sector leads overall expansion

On a sectoral basis, the sharpest expansion in activity was again recorded on residential projects. Although the rate of growth in housing activity slowed, it remained substantial. A further marked increase in commercial activity was registered, while civil engineering activity continued to fall at a sharp pace during the month.

New business growth accelerates

New orders increased for the eighth consecutive month in February, and the rate of growth quickened from that seen in January. Panellists reported that strengthening market conditions had resulted in greater opportunities to gain new business.

Faster rise in staffing levels

The rise in workloads, allied with anticipated growth of new orders in future months, was behind another increase in employment at construction firms. The rate of job creation was solid, having quickened for the second month running. Staffing levels have increased in each month since last September.

Companies remained optimistic regarding the 12-month outlook for activity, with sentiment only slightly below the survey record seen in December. Supporting optimism were signs of improving client confidence amid stronger economic conditions, according to respondents.

Purchasing activity declines

Purchasing activity decreased in February, ending a five-month sequence of growth. Some panellists indicated that a fall in on-site activity, partly due to poor weather conditions, had contributed to the drop in input buying.

Companies continued to report lengthening supplier delivery times, mainly linked to stock shortages at vendors. That said, the deterioration was the weakest in three months. Although input prices increased further in February, the rate of inflation eased for the fourth month in a row and was only modest.