Construction activity in Ireland during October rose at the slowest pace since March 2015, the latest Ulster Bank Construction Purchasing Managers Index (PMI) survey has found.
Growth of new business also eased, the bank said, but the rate of job creation quickened to a three-month high. Meanwhile, input costs rose at the slowest pace since September 2017.
At 52.9 in October, down from 56.2 in September, the Ulster Bank Construction PMI – a seasonally-adjusted index designed to track changes in total construction activity – signalled the weakest upturn in output since March 2015.
That said, total activity has now risen in each of the past 62 months, Ulster Bank reported. Where activity increased, panellists linked this to improving customer demand, it added.
Of the monitored sub-categories, residential and commercial construction activity increased, albeit at slower rates than in September. As was the case in September, commercial was the best-performing sector. On the other hand, civil engineering construction activity declined in October – and at the fastest pace in 14 months.
Incoming new orders at Irish construction firms were found to have increased during October. Despite easing from the previous month, October marked the 64th successive monthly rise of new business inflows. The bank said firms had indicated that new construction projects and increased market activity were the principal factors behind the expansion in new work.
Expectations for the year-ahead for construction output were felt to be strong. However, October’s index reading was said to have signalled that firms were the least optimistic since August 2013.
A number of survey respondents attributed confidence to expectations of greater customer orders.
Simon Barry, chief economist, Republic of Ireland, at Ulster Bank, said the October results revealed a notable loss of momentum in the growth rate of construction activity.
“While that still leaves the sector comfortably in expansion territory, the PMI has now fallen for three months in a row, with the October reading marking the slowest pace of growth in over three and a half years.
“It is not wholly surprising to see some cooling in the pace of construction growth given the extremely rapid expansion recorded in the summer and the similar signs of slowdown from elsewhere in the Irish private sector of late – the October manufacturing and services PMI surveys also picked up some moderation in growth.”
But he said the headline results from the October Construction survey were on the disappointing side.
“Nevertheless, we are not overly troubled at this stage, for several reasons.
“First, we think at least some of the recent slippage in the Construction PMI likely reflects the usual ebb and flow of the headline survey results. Indeed, other metrics within the survey highlight that new orders are holding up well and firms are continuing to hire at a very solid rate – features of the results which argue against concluding that a sustained weakening in activity is underway.”
He said that the sector’s overall outlook continued to be underpinned by the housing supply shortfall and by the marked step-up in the growth of Exchequer capital spending.
“So while the headline PMI results for October point to a disappointing start to the final quarter of the year for construction activity,” said Barry, “we would be surprised if the results in the coming months don’t show signs of renewed improvement.”