Construction recovery ‘stalls’ in August despite reopening of economy

PMI measuring trade in building materials fell ‘modestly’ for first time in three months

Purchasing activity in the construction industry slipped in August due to virus “uncertainty and general economic weakness”. Photograph: Bloomberg

Purchasing activity in the construction industry slipped in August due to virus “uncertainty and general economic weakness”. Photograph: Bloomberg

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The nascent recovery in construction activity that began after the easing of lockdown measures began to stall in August, according to industry data.

The Ulster Bank purchasing managers index (PMI), which measures trade in building materials and is considered an early barometer of economic activity, fell “modestly” for the first time in three months last month, the bank says.

Ulster Bank says the pace of the decline was not as fast as the plunge in activity recorded early in the pandemic. But even with the continued opening up of the economy throughout the summer, purchasing activity still slipped in August due to virus “uncertainty and general economic weakness”.

The sharpest decline was recorded in commercial building as clouds continue to hover over the office market due to working-from-home trends. Housebuilding activity and civil engineering also fell.

“The recovery in Irish construction activity showed signs of stalling in August,” said Simon Barry, the bank’s chief economist for the Republic. “High levels of market uncertainty linked to the effects of the pandemic and some recent signs of a cooling in the wider economy’s recovery momentum weighed on the August results, including in relation to sentiment about the sector’s future prospects.”

He said many construction firms were still expressing optimism for the year ahead despite headwinds.

“With leading indicators such as the housing commencements data continuing to point to further upside for housing output, we would be surprised if the housing PMI in particular doesn’t show renewed improvement in the months ahead,” said Mr Barry.

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