Pace of growth in Irish construction sector slowed in June, survey finds

Growth in housing and commercial work slowed while civil engineering contracted

The Irish construction industry returned to growth in late 2013  and has remained in expansionary mode ever since. Photograph: Alan Betson

The Irish construction industry returned to growth in late 2013 and has remained in expansionary mode ever since. Photograph: Alan Betson

 

The rate of expansion in construction activity in the Republic slowed in June, with the civil engineering segment of the market contracting slightly even as the housing and commercial subsectors remained strong, according to a report published on Monday.

The latest reading of the monthly Ulster Bank Construction Purchasing Managers’ Index (PMI) shows that activity across the industry eased to 58.2 in June from 63.6 in May. A reading above 50 per cent indicates that activity is expanding.

“Irish construction firms continue to experience rapid growth in their activity levels,” said Simon Barry, chief economist for the Republic of Ireland with Ulster Bank. While the PMI index dipped in June, “this follows a particularly strong May performance and the still very-elevated level of PMI indicates the recovery in Irish construction continues apace”.

The Irish construction industry returned to growth in September 2013 for the first time in more than six years and has remained in expansionary mode ever since, driven by Dublin office construction and, more recently, rising home completions.

The Department of Housing estimates that almost 15,000 homes were built in the State last year, based on ESB electricity connections data, but well off the 25,000 new units currently needed every year, according to the Economic and Social Research Institute.

Rose sharply

Recent figures from the Central Statistics Office suggest that residential building activity rose sharply in the first quarter of this year.

Ulster Bank said June “marked the 48th consecutive month of rising housing activity, highlighting that four years of expansion have now been recorded by firms operating in this particularly important subsector”.

Still, the housing activity component of the index dipped to 59.5 in June from 69.2, while commercial fell to 60.8 from 65.2 and civil engineering contracted slightly, with a reading of 48.4, compared to 51.8 for the previous month. Infrastructure spending has remained constrained since the outset of the downturn.

Ulster Bank said that construction firms are continuing to hire, with 28 per cent of respondents reporting an increase in employment during the month.

“There were further signs of delays in receiving purchased items, however, with supplier lead times lengthening again,” it said. “Panellists indicated that this was due to shortages of raw materials, particularly timber.”

A number of panellists highlighted cost inflation, particularly for insulation.