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| Source: NTC Economics |
The Irish construction economy continued to expand in March. Construction activity increased for the forty-third month in succession, with firms linking growth to efforts to meet deadlines. However, at 54.5, from 57.9, the Ulster Bank Construction Purchasing Managers' Index (PMI) – a seasonally adjusted index designed to measure the overall performance of the construction economy – suggested that the rate of growth eased and was weakest for four months. Moreover, activity growth was slower than the averages for both the past year and the current expansionary period.
Commenting on the survey, Pat McArdle, Chief Economist at Ulster Bank, noted that:
“The February bounce in construction was unwound in March as the pace of expansion in both civil and commercial eased perceptively. Commercial is still very strong but civil is edging down towards no-change territory – this is counter intuitive as Government capital spending was very strong in the first quarter so we will wait before jumping to conclusions. In underlying terms, overall construction may be stronger than the March PMI indicates. This may explain why employment, confidence and, to a lesser extent, new orders are holding up well.
“However, housing weakened further in March when a bounce might have been expected given that weather was no longer a limiting factor. At this stage, housing activity seems to reflect a slowing in new orders and a perception that selling prices may weaken further. The industry has been quick to respond to the changing environment.”
Housing activity declined at sharpest rate for five years
Activity growth was recorded in two of the three broad construction areas monitored by the survey in March. Commercial was the best performing, with the rate of activity growth remaining strong, albeit down on that seen in February. Civil engineering activity continued to rise, but at the slowest pace in the current twenty-month period of expansion. Work undertaken on residential projects declined at the most marked rate for five years.
Latest Construction PMI readings
Feb’07 Mar’07
Total Activity 57.9 54.5
Housing Activity 47.9 46.1
Commercial Activity 64.8 61.3
Civil Engineering Activity 55.4 51.9
Index readings above 50 signal an increase in activity on the previous month and reading below 50 signal a decrease. All indexes given above and displayed in the charts are seasonally adjusted.
Source: NTC Economics Ltd.
New business increased, but at weakest pace since September 2003
In line with the trend in activity, Irish constructors’ new order volumes rose for the forty-third month in a row in March. However, new business increased at the slowest pace since September 2003 with a number of firms reporting weaker market demand.
Employment growth remained robust
March data pointed to a robust increase in employment at Irish construction firms. Reports suggested that staff were hired in response to higher new order volumes. The rate of employment growth eased from February but was in line with the average for the past year.
Input prices rose sharply
Prices paid by Irish constructors for their materials rose sharply in March. Around 40% of firms indicated that costs had increased since February, with a wide range of products reported to have risen in price. However, the rate of cost inflation eased slightly and was below the average for the past year.
Input buying continued to rise
Higher new order volumes contributed to a further rise in input buying at Irish construction firms. Purchasing increased for the forty-first consecutive month, although at the slowest rate in the current growth period. Supplier delivery times deteriorated at a moderate rate as stock shortages contributed to delays.
Confidence of constructors remained at a high level
The degree of confidence at Irish construction firms in March was unchanged since the previous month. Marketing campaigns, new orders and company expansion plans contributed to a high level of optimism.
