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Construction activity bounces back, but costs soar

Activity in the construction sector expanded for the first time this year in May, according to Ulster Bank’s latest Purchasing Managers’ Index.

The index, which is designed to track changes in overall construction activity on a scale of 1 to 100, passed the 50 no-change mark for the first time since the imposition of restrictions on most activity at the start of the year.

At 66.4 in May, the measure was up sharply from 49.3 in April.

It was the fastest pace of increase in activity since early 2016 and the second-fastest in the lifetime of the series which has been running for over two decades.

The pick-up in activity was broadly-based with all three sub-sectors – housing, civil engineering and commercial projects – recording very sharp improvement in activity.

The improvement was particularly apparent in residential activity where the Housing PMI hit a new record high.

“A new survey high was also registered in the New Orders index, with firms reporting that rapid growth in new business was underpinned by the lifting of restrictions and the associated release of pent-up demand,” Simon Barry, chief economist with Ulster Bank in the Republic of Ireland, said.

“In turn, the much-improved prospects for demand are leading firms to increase their hiring activity, with the survey’s employment index pointing to the fastest pace of job creation in over two years.”

However, on the downside, the rate of input cost inflation rose to a record high amid further pressure on supply chains.

Almost three quarters of respondents signalled that their input prices had risen, with copper, plastics and steel among the most commonly cited items that were costing more.

“Higher prices and transportation delays were linked to global material shortages and to Brexit. So, 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,” Mr Barry noted.

The lengthening of lead times was the most pronounced in four months and one of the greatest on record.

There was a strong level of optimism expressed with three in five firms saying they were positive about the outlook.

The further reopening of the economy and continued release of pent-up demand supported ongoing confidence among firms that activity levels will increase over the coming year.

Article Source – Construction activity bounces back, but costs soar – RTE – Brian Finn

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