Construction activity in Republic rose again in October

Building, orders and employment all rose rapidly last month, says Ulster Bank index

Total construction activity in the Republic increased for the second successive month in October. Photograph: Alan Betson

Total construction activity in the Republic increased for the second successive month in October. Photograph: Alan Betson

 

The construction sector in the Republic recorded a strong start to the final quarter of the year, with activity, new orders and employment all increasing at faster rates in October, according to the latest Ulster Bank Construction Purchasing Managers’ Index (PMI).

Meanwhile, a similar survey by Ulster Bank in Northern Ireland showed that firms enjoyed a surge in export orders last month on the back of sterling’s continued weakness but their good fortune was mirrored by growing problems for local importers as costs continue to spiral.

In the Republic, the seasonally adjusted index, designed to track changes in total construction activity, increased for the second successive month in October to 62.3, up from 58.7 in September.

This represented a sharp monthly rise in total construction activity, and the fastest in seven months. Construction output has increased continuously since September 2013.

Commenting on the survey results, Simon Barry, chief economist for the Republic of Ireland at Ulster Bank, said: “Importantly, construction firms are continuing to benefit from robust increases in new business levels, with the new orders index rising to its highest level since February following a fifth consecutive monthly acceleration in October.

“Firms continue to report a strengthening in client demand amid a general improvement in economic conditions as an important contributor to the ongoing uplift in new business volumes. In turn, the healthy expansion of new orders continues to underpin increased demand for construction workers. The employment index rose sharply last month, with the pace of hiring accelerating to its fastest in eight months as almost one-third of firms noted a rise in employment.”

Mr Barry said the mainly domestic-facing construction sector was less directly exposed to adverse Brexit impacts than more heavily trade-dependent areas of the economy.

Northern Ireland figures

In Northern Ireland, Ulster Bank’s PMI survey showed that although businesses are enjoying an export boost following the Brexit vote, the total number of new orders recorded by local firms remained largely unchanged during October.

The PMI survey also highlighted that while business activity demonstrated growth last month in the local economy, the pace of growth was sluggish and weaker compared to nearly every other UK region.

Richard Ramsey, Ulster Bank’s chief economist in Northern Ireland, said the survey reveals the stark differences between domestic and export markets.

“Overall, incoming orders stagnated in October and have failed to grow since June. However, export orders expanded at their second-highest rate since the survey began. This implies that domestic orders have been contracting at a significant rate.

“The converse seems to be the case within the construction sector. Given Belfast’s crane-cluttered skyline, it would appear that business conditions within the local construction market are relatively buoyant.

“However, despite this, and perhaps surprisingly, the PMI points to rapid rates of contraction in construction output orders and employment. This is largely due to subdued demand within a major external market, ie GB.”

Mr Ramsey said sterling’s current weakness was a “mixed blessing” for the North as the manufacturing and retail sectors are forced to bear the brunt of the input-cost inflation.