Housing sector drives post-Covid construction sector surge

Construction activity continued to ramp up at a rapid pace in June following the loosening of restrictions, according to the latest purchasing managers' index (PMI) for the sector from Ulster Bank.

The seasonally-adjusted index remained well above the 50 mark that signals the sector is expanding – posting a reading of 65 following 66.4 the previous month – as activity increased for the second consecutive month following the full reopening of the sector.

"Activity expanded at an exceptionally strong pace again in June as the headline PMI was at one of the highest levels in the survey's history for the second consecutive month, albeit down marginally from May," said Simon Barry, chief economist for Ulster Bank in the Republic of Ireland.

While growth was recorded across the commercial and civil engineering sectors, it was “particularly rapid” for residential housing last month, with the sector’s bounceback following a record snap-back pace in May.

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Mr Barry said strong momentum was also evident in new business flows, despite easing from a survey record in May, with the sector seeing a robust pick-up in orders and activity that underpinned further increases in staffing levels across the industry.

“Employment rose for the third month running as respondents linked strong job gains to improving customer demand,” he said.

Companies remained optimistic that activity will continue to rise over the coming year amid expectations that demand will keep growing as the economy reopens further.

Input costs

But while the signals of ongoing strength in activity were “certainly encouraging”, Mr Barry sounded a note of caution on input cost inflation, which accelerated to a second consecutive record high.

Three-quarters of all respondents indicated that their cost burdens had risen over the month and steel was the item most widely reported to have increased in price.

“The June survey results highlight that the sector continues to face important supply chain and cost challenges related to Brexit, Covid and global supply and shipping problems,” he said.

Suppliers’ delivery times continued to lengthen considerably, with the rate of deterioration much faster than anything seen before the pandemic.

Global issues with raw material supplies and shipping contributed to longer lead times, with Brexit also a factor, respondents to the survey reported.