Strong growth in activity, new orders and employment reported in April 

The Irish construction sector continued its recent run of strong expansion in April as growth of activity and new business both reached multi-year highs.

Firms responded to increased workloads by raising their staffing levels at one of the fastest rates in the series history. Meanwhile, business confidence improved to the strongest since the survey began in June 2000.

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The Ulster Bank Construction Purchasing Managers’ Index® (PMI®) – a seasonally adjusted index designed to track changes in total construction activity – rose to 63.5 in April from 60.2 in the previous month. Activity has now increased in each of the past eight months, with the latest expansion the sharpest since December 2004.

Commenting on the survey, Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, noted that:
“The results of the April survey of the Ulster Bank Construction PMI point to a further strengthening of the recovery in Irish construction last month.  There was a marked acceleration in overall activity in April as the headline PMI reached its highest level since the end of 2004.  The strengthening was particularly evident in Housing and Commercial activity where the pace of growth also quickened to multi-year highs.  Offering further encouragement was a further substantial increase in New Orders which rose for the 10th consecutive month in April, and at the fastest pace since February 2006.

“With stronger trends in both activity and new business flows becoming better-established, respondents reported that they had again boosted staffing levels.  The April gains in employment represented the eighth consecutive month of net job creation, as the pace of jobs growth quickened to its fastest in almost 10 years.  Furthermore, confidence about the sector’s future prospects reached a record high last month as some two-thirds of respondents anticipate that activity will increase over the coming year.  More generally, taken together with the robust recent readings of the services and manufacturing equivalents, the much-improved trends in the Construction PMI provide clear evidence of the broad-based improvement that is now taking hold across both export-oriented and domestic-facing sectors of the Irish economy.”

LatestConstructionPMI readings

Mar’14       Apr’14

TotalActivity                             60.2         63.5

HousingActivity                          59.9         63.4

CommercialActivity                    61.3         63.6

CivilEngineeringActivity            44.1         41.8

Indexreadingsabove50signalanincreaseinactivity onthe previousmonthandreadingbelow50signaladecrease.All indexesgivenaboveanddisplayedinthechartsare seasonally adjustedSource: Markit.

Residential and commercial activity both rise at faster rates
The improvement in overall construction activity reflected substantial rises in work on both residential and commercial projects, with rates of growth quickening in each case. On the other hand, civil engineering activity continued to fall, and the rate of decline was sharper than that seen in the previous month.

Tenth successive monthly growth of new orders
Anecdotal evidence suggested that growth of activity was supported by a further increase in new business. New orders rose for the tenth consecutive month and the rate of expansion accelerated for the third month running to the strongest since February 2006. Consistent with the activity data, respondents mentioned that the housing and commercial sectors had been the main sources of growth in new business.

Job creation quickens again
As workloads continued to rise, construction firms took on extra staff again in April. Furthermore, the rate of job creation quickened and was one of the sharpest in the series history.

Purchasing activity also increased at a considerable pace during the month, with the latest rise the fastest since December 2004. This rise in demand for inputs put added pressure on suppliers, who reportedly had insufficient stock levels. As a result, delivery times lengthened for the thirty-fourth successive month.

Cost inflation remained modest in April and slowed from the previous month. The pace at which input prices increased was slower than the series average.

Record optimism registered
Construction firms generally expect market conditions and new business levels to improve further over the coming year, leading to growth of activity. Furthermore, optimism improved to the strongest in the series history.