New orders drive recovery in construction, latest data shows

Activity in the construction sector is continuing to bounce back from the crash, with Ulster Bank's latest purchasing managers' index (PMI) signalling another monthly rise.

Although the pace of growth in December’s index moderated to 58.9, it remained well above the 50 line that separates growth from contraction amid a faster expansion of new orders and positive rates of job creation.

Construction activity in the Republic has now risen in each of the past 40 months.

Both the housing and commercial construction categories continued to record sharp increases in activity, with the rate of growth marginally quicker in the latter.

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In contrast, civil engineering activity decreased for the second month running and at the fastest pace since April 2014.

New orders in the sector have risen continuously throughout the past 3½ years, with December seeing a strong monthly expansion that was faster than that recorded in November, the report noted.

Increased staffing

Rising workloads led construction firms to increase their staffing levels again at the end of the year, it also said.

However, despite the uptick in activity, the number of new residential units being built in the housing sector is barely half the 30,000 required to meet demand, a scenario which is likely to drive inflation for some time to come.

"Overall, the December survey results round off another strong year of recovery for Irish construction firms, with the PMI consistently pointing to ongoing healthy expansion throughout 2016," Ulster Bank chief economic Simon Barry said.

“Moreover, momentum behind the sector’s recovery continues to look encouragingly solid, with a marked pick-up in new orders in December indicating that activity trends look set to remain positive in early 2017,” he said.

Mr Barry also noted that firms remained strongly optimistic about the coming year, with almost two-thirds of respondents expecting further growth in activity in the coming 12 months.