Recovery of construction continues despite sharp rise in prices

Construction’s recovery continued its momentum last month, despite sharply rising prices, figures published on Monday show.

House and commercial building grew along with big civil engineering projects in November, according to the Ulster Bank construction purchasing managers' index (PMI).

The index returned an overall reading of 56.3 for the month, slightly behind the 56.9 recorded in October.

Any figure above 50 means that construction expanded on the previous month, while any number below that shows that it shrank.

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Simon Barry, chief economist Republic of Ireland at Ulster Bank, said recent Central Statistics Office figures showed that building was one of the fastest-growing industries in the three months to the end September.

“The latest results of the Ulster Bank construction PMI survey highlight that construction firms have continued to experience strong growth through the middle of the fourth quarter,” he said.

Eased slightly

Mr Barry conceded that activity eased slightly in November but continued to show expansion, although the pace has slowed from the snap back in growth evident once Covid lockdowns eased in the spring.

“The pace of growth moderated somewhat from a very rapid pace in commercial activity, while housing and civil engineering both registered improvement last month to leave all three subsectors in expansion territory,” he added.

However, Mr Barry warned that November’s results show that builders continue to face high costs and delays in getting materials.

The economist blamed Brexit, higher global and domestic energy prices, more expensive materials, carbon taxes and rising freight charges for this.

“And yet there was just a hint that the intensity of supply-chain disruptions may be easing a little as input price inflation and the pace of lengthening of supplier lead times eased to the weakest in six and seven months respectively.”

Almost 70 per cent of builders who took part in the survey confirmed that their costs rose in November. They also said that delivery times lengthened substantially as various pressures continue.

Reports over the weekend indicate that builders’ suppliers are warning customers of further price increases to come in the new year.

New projects in housing, hospitals and renewable energy continued to fuel growth through the month, boosting builders’ order books.

Each of the industry’s individual sectors grew in November, the index shows. Housing recorded a reading of 55.1, against 54.2 in October. Commercial building reached 56.3 from 60.4 the previous month.

Civil engineering, which includes big State-funded building projects, recorded 56.4 in November from 48.3 in October, the fastest pick-up in activity of the three.

Increases in business

The bank noted that November was the first time in four months that all three sectors reported increases in business.

Companies were optimistic that growth would continue in 2022, said Ulster Bank.

While sentiment dipped from October, it remained above average, with almost 45 per cent of respondents predicting further expansion in the new year.

“Expectations of further improvements in customer demand were central to hopes for growth of activity,” Ulster Bank noted.