Construction industry set to build on ‘strong start’ to 2018

The Irish construction industry got off to a "strong start" to the year, posting faster increases in activity, new orders and employment, according to the latest Ulster Bank purchasing managers' index (PMI) for the sector.

Confidence improved again as the seasonally-adjusted index rose to a reading of 61.4 in January, up from 58 in December, and far above the 50 level that signals an expansion.

Overall activity, which has risen continuously since September 2013, rose at the sharpest pace last month since last May.

The index paints "a very encouraging picture", said Simon Barry, Ulster Bank's chief economist for the Republic.

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Growth in new orders among construction firms is now at a six-month high, while rising workloads led businesses in the sector to increase their staffing levels. This is the 53rd consecutive month in which that has been the case.

Input costs rose at the fastest pace in 11 years, the index found, while demand for materials caused a further lengthening of delivery times. Higher costs for fuel and labour were also reported.

January saw a “particularly notable” acceleration in construction in the commercial sector, which was the fastest growing part of the industry last month. Activity in housing rose to an eight-month high, “consistent with ongoing very rapid activity growth”.

Civil engineering, the relative laggard of the three sectors, also recorded a second month of expansion in a row.

“Overall the January PMI indicates that, like their services and manufacturing counterparts, Irish construction firms have made a strong start to 2018,” Mr Barry said.

“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.”