Construction ‘ramps up’ in May with fastest increase in five years

Purchasing activity in the construction sector increased in May at the sharpest monthly rate since February 2016, as the lifting of lockdown restrictions unleashed a wave of activity in the sector, according to an index maintained by Ulster Bank.

The bank’s purchasing managers index (PMI), which tracks increases in materials orders and activity across house construction, engineering and commercial building, gave one of its strongest readings in May in the index’s 21-year history, as the sector rebounded from depressed levels in April.

Ulster Bank said the index illustrated the “ramping up” of building activity after Level 5 restrictions were eased. A score on the index of above 50 represents a monthly increase in activity, while below 50 represents a decrease. The overall index recorded a score of 66.4 compared to 49.3 in April; and May was the first monthly increase in activity in 2021.

The surge in activity was most prominent in housebuilding, which recorded a score of 73.4. Commercial building was at 63.4 and civil engineering activity was recorded on the index at 57.6.

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In addition to a surge in new materials orders, there was also, as expected after the lifting of lockdown, a wave of hiring as sites reopened and builders were allowed back on the job. Ulster Bank said staffing levels had increased on a monthly basis at the fastest pace since April 2019, when the sector was near its height before it was cut down by the pandemic the following spring.

The bank warned, however, of a rise in materials costs, with 73 per cent of businesses contacted by the index’s authors recording price rises. Ulster Bank attributed this to a global rise in the cost of building materials, as well as supply chain issues caused by Brexit.

"As undoubtedly encouraging as the important signs of revival in activity are, this month's survey also again highlighted that the sector does continue to face some important challenges," said Simon Barry, the chief economist in the Republic for the bank.