Construction sector expands at fastest rate in a decade

Ireland’s construction sector expanded at its fastest rate in a decade in October and companies are upbeat on prospects for the coming 12 months.

Increased new orders and improving economic conditions were the main factors leading the index to rise to 64.9 in October from 61.5 the previous month. Any figure above 50 indicates expansion.

It was the second-highest reading since the seasonally-adjusted Ulster Bank Construction Purchasing Managers' Index began in June 2000, with November 2004 the only month to have seen a faster expansion.

The improved environment saw employment in the sector rise at one of the sharpest rates in its 14 year history, the survey found, with around 29 per cent of respondents increased employment during the month.

"The pace of growth in Irish construction accelerated markedly in October," said Simon Barry, chief economist at Ulster Bank in the Republic, although he recognised that activity was recovering from historically low levels during the recession.

“Both housing and commercial activity registered another month of particularly rapid rises, with the latter posting its strongest gain in over nine years.”

For the first time in seven years, the index recorded activity expanding in the civil engineering sector, with that sub index recording a marginally positive figure of 50.6. As a result, for the first time since October 2006, each of the three monitored sectors posted rises in construction activity.

“Firms remained upbeat about prospects for the future,” said Mr Barry. “In the near-term, activity in the months ahead will be underpinned by buoyant flows of new business.

“The sustained increases in both activity and orders continue to promote more favourable trends in staffing levels, with the employment index also hitting a 10-year high in the latest survey as the pace of hiring increased further. Moreover, confidence about the construction outlook over the coming 12 months also remains elevated, with sentiment close to record highs again last month, partly reflecting optimism surrounding the wider Irish economy.”

Although the index reported continuing increases in input prices, the rate of inflation eased slightly for the second successive month and was the weakest since June.

Use of sub-contractor rose for the eighth consecutive month. The survey found that while the quality of work carried out by sub-contractors was deemed to have deteriorated slightly, rates charged increased only slightly less dramatically than in September.