Growth in the Irish construction sector strengthened at the start of 2016, with activity rising at the fastest pace in seven months on the back of an accelerated expansion in new business.

This encouraged firms to take on extra staff and increase their purchasing activity, while business sentiment remained strongly positive. The Ulster Bank Construction Purchasing Managers’ Index® (PMI®) – a seasonally adjusted index designed to track changes in total construction activity – rose sharply to 63.6 in January from 58.6 in December. This signalled a second successive acceleration in the rate of growth of construction activity, with the latest expansion the fastest since June last year. Total activity in the sector has now increased in each of the past 29 months.

Commenting on the survey, Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, noted that: “The Irish construction sector has gotten off to a very strong start to 2016 according to the results of the latest Ulster Bank Construction PMI survey.  Building on December’s solid improvement, a further significant increase in the headline PMI reading took it to 63.6 in January – its highest level since last June.  The New Orders and Employment indices both also rose to seven-month highs in January indicating that the pace of overall activity, new business and hiring have all accelerated meaningfully in the early part of the New Year.  Furthermore, the early-year improvement has been broadly based: respondents have reported stronger activity growth across all three sub-sectors of Housing, Commercial and Civil Engineering, with a particularly strong – and welcome – pick-up recorded in Housing where growth was the fastest since October 2014. 

“Overall, the strong Construction PMI figures mirror the encouraging signals sent from the other Irish PMI surveys for January, particularly the Services equivalent which jumped to its highest level in over 9 ½ years.  So while there are some prominent downside risks facing the outlook for the global economy at present, several important areas of the domestic economy in Ireland look to be carrying considerable momentum into the early months of 2016.”

All three categories see growth quicken, Each of the three monitored areas of the construction sector matched the total picture by recording faster rises in activity during January. The steepest increase in activity was on housing projects, where the rate of growth was the sharpest since October 2014. Meanwhile, rates of expansion in the commercial and civil engineering categories were the fastest in seven and 13 months respectively.