Strong rise in housing activity drives construction sector growth in December
The construction industry finished 2020 in expansion mode on the back of strong levels of housebuilding, the latest Ulster Bank’s Construction Purchasing Managers Index shows.
The Ulster Bank construction PMI posted a reading of 52.3 in December, down from 53.5 in November but above the 50 no-change mark for the second month in a row to signal a further rise in activity.
Index readings above 50 signal an increase in activity on the previous month and readings below 50 signal a decrease.
Companies linked the increased output to improving demand, though there were continued reports of disruption caused by the Covid-19 pandemic.
Ulster Bank said that a “sharp and accelerated” rise in housing activity was behind the increase in total construction work in December.
Activity on residential projects expanded to the greatest extent since July and at one of the fastest rates in the past year-and-a-half.
But commercial activity decreased fractionally and civil engineering work continued to fall, the bank added.
Those rising workloads led to further job creation in the sector and Ulster Bank noted that employment increased to the greatest extent since June 2019.
The bank also said that greater demand was also partly behind a sharp rise in purchasing activity, with stockpiling ahead of the end of the Brexit transition period also a factor.
It said this increasing demand for inputs imparted pressure on supply chains, which suffered from substantial disruption in December.
“Issues at UK ports were also mentioned as contributing to the greatest lengthening of suppliers’ delivery times in more than 20 years of data collection, except for during the first Covid-19 lockdown in spring 2020,” Ulster Bank stated.
Simon Barry, chief economist at Ulster Bank, said the latest construction PMI survey show a second consecutive monthly rise in Irish construction activity in December as the sector closed out 2020 in expansion mode, albeit at a slightly slower pace compared to November.
He said that gains in actual and prospective activity have also underpinned rising demand for construction workers, with the rate of job creation picking up to a 1½ year high.
“Moreover, optimism about the year ahead improved further last month as sentiment rose to its highest level since February 2020,” the economist said.
“But while vaccine roll-out plans continue to underpin confidence about medium-term recovery prospects, this week’s further significant tightening of public health restrictions, including a closure of most construction work until at least the end of January, represents a major setback for the wider Irish economy and the construction sector itself, which look set to start 2021 on a weak footing,” he added.