The strengthening growth at the start of this year came on the back of an accelerated expansion in new business. This encouraged firms to take on extra staff and increase their purchasing activity, while business sentiment remained strongly positive.
The Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to track changes in total construction activity – rose sharply to 63.6 in January from 58.6 in December. Total activity in the sector has now increased in each of the past 29 months.
Simon Barry, chief economist Republic of Ireland at Ulster Bank, said: “The Irish construction sector has gotten off to a very strong start to 2016 according to the results of the latest Ulster Bank Construction PMI survey. Building on December’s solid improvement, a further significant increase in the headline PMI reading took it to 63.6 in January – its highest level since last June. The New Orders and Employment indices both also rose to seven-month highs in January indicating that the pace of overall activity, new business and hiring have all accelerated meaningfully in the early part of the New Year. Furthermore, the early-year improvement has been broadly based: respondents have reported stronger activity growth across all three sub-sectors of Housing, Commercial and Civil Engineering, with a particularly strong – and welcome – pick-up recorded in Housing where growth was the fastest since October 2014.”
Anecdotal evidence linked the higher activity to growth of new orders. New business increased for the thirty-first successive month in January, and to the greatest extent since June last year.
The usage of subcontractors rose at a sharp and accelerated pace in January, contributing to another decline in their availability. Companies reported a further modest reduction in the quality of work carried out by subcontractors, but rates charged increased at a sharp and accelerated pace.
Business sentiment was little-changed at the start of the year, remaining strongly positive. Rising new work was the main driver of optimism regarding activity for the year ahead, with three-fifths of respondents predicting growth.