Construction activity rises sharply again as new orders surge

Despite growth, supply chain disruptions remained ‘highly problematic’ for firms

The sector expanded for the sixth consecutive month, according to Ulster Bank’s construction purchasing managers’ index (PMI). Photograph: iStock

The sector expanded for the sixth consecutive month, according to Ulster Bank’s construction purchasing managers’ index (PMI). Photograph: iStock

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Growth in Irish building activity accelerated again in October, with the sector expanding for the sixth consecutive month, according to Ulster Bank’s construction purchasing managers’ index (PMI).

The slight acceleration in growth reflected an improving picture for new orders, which was partly related to the ongoing release of pent-up demand for construction services following the Covid-19 pandemic.

As a result, the index ticked up to a reading of 56.9 last month, up from 56.3 in September and well above the 50 threshold that signals an increase in activity.

“Having eased over the summer months following the post-lockdown snap-back in activity in Q2, the headline PMI rose slightly last month, signalling a modest re-accelerate in the pace of overall construction activity growth at the beginning of the fourth quarter,” said Simon Barry, Ulster Bank’s chief economist for the Republic.

“Commercial activity was particularly strong in October as the pace of growth picked up markedly, while residential activity registered solid expansion last month, albeit at a reduced pace relative to September,” he said.

Strong demand for construction services was evident in further gains for both new orders and employment, with new business and staffing levels recording a seventh consecutive month of expansion.

Headwind

However, firms highlighted that disruptions to their supply chain remain “a highly problematic headwind”, he added.

“Respondents cited Brexit, Covid disruption and shortages of delivery drivers and materials as factors which contributed to a record lengthening of delivery times and record growth in input costs.”

Despite these headwinds, firms were confident about the outlook for the next 12 months, with overall sentiment ticking up compared to September and remaining above the long-run average. Some firms predicted the further release of pent-up demand over the coming year.

Inflation continues to be a feature of the sector, with almost four-fifths of respondents indicating that their input prices increased over the month.